The Historical Development of Contingent Valuation
I. INTRODUCTION The major impediment to performing a benefit–cost analysis in many fields of applied economics, such as those dealing with culture, environment, health, and transportation, is that the goods (commodities and services) of interest are not routinely bought and sold in markets.1 Hence, prices, the economic data usually used by economists as indicators of the economic value of such goods, are not generally available. To overcome this obstacle, economists developed two basic approaches (Braden and Kolstad, 1991; Freeman, 1993): an indirect valuation approach that infers economic value from observations of consumer behavior with respect to marketed goods having a relationship to the public good, and a direct approach that gives consumers the opportunity to make choices with respect to the public good itself. The indirect approach relies upon one of two factors: that the public good can be bundled in as one of the attributes of a private good (for example, close proximity to a public park) and that expenditures of money or time are sometimes necessary to use the public good (such as driving to a hiking trail in a national forest). The direct approach can be implemented by subjecting consumers to a constructed choice situation such that the particular public good can be provided by an affirmative vote. The survey variant of the direct approach has come to be known as “contingent valuation” (CV) because the estimates of economic value obtained are contingent on the features of the scenario posed in the survey.2 CV surveys differ...
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