Chapter 3: A Practitioner’s Primer on the Contingent Valuation Method
John C. Whitehead* 3.1 Introduction Consider the following hypothetical situation. You develop an intellectual interest in some good or service not typically traded in markets. It could be almost anything, such as adverse health eﬀects from a hazardous waste disposal facility, a new sports arena, or preservation of a historic shipwreck. Its value could be important for eﬃciency reasons (e.g., a beneﬁt–cost analysis of a management plan), for academic reasons (e.g., tests of economic theory), or for more important reasons (e.g., completion of a graduate thesis). Unfortunately, even though you may know the calculus of the consumer surplus triangle, you have no idea how to actually estimate the consumer surplus of anything in real life. Bummer. You are industrious and dive right into the literature. You learn that there are several ‘implicit market’ methods that can be used to estimate economic value for non-market goods. You learn that the hedonic pricing method can be used to value location-related amenities, the travel cost method can be used to value recreational amenities, and the averting behavior method can be used to value health care and other services. But, these methodologies are not really what you are after. After all, your case study has pure public good attributes. It involves behavior beyond the range of historical experience. It may generate both use value and non-use (gasp!) value. One lucky day you stumble across the contingent valuation method (CVM). You collect a bunch of journal articles from the Journal of...
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