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Chapter 2: Using Hedonic Pricing for Estimating Compensation Payments for Noise and Other Externalities from New Roads
Ståle Navrud and Jon Strand 1 INTRODUCTION Hedonic pricing (HP) uses multiple regression techniques to isolate implicit prices: that is, differences in property prices attributable to marginal differences in property characteristics. One of the most frequent applications has been to transportation noise, mainly from road traffic, aircraft and, to a lesser extent, railways. Bateman et al. (2001) provides a good review of HP studies of transportation noise, while Schipper et al. (2001) and Nelson (2004) are examples of meta-analyses of HP studies of aircraft noise.1 Hedonic Pricing models have been used to value peace and quiet for more than 35 years; ever since the seminal paper of Rosen (1974). Even though there were early comparative studies of HP and contingent valuation (CV) (Brookshire et al. 1982),2 the use of stated preference (SP) methods like CV and choice experiments (CE) to value noise are much more recent (see Navrud, 2002, for a review). Stated preference methods for valuing noise gained popularity since they can more easily isolate the effect of noise from other externalities caused by road traffic; including vibration, barrier effects, air pollution, safety concerns).3 Since most HP models do not contain variables for these other externalities, the estimated implicit price of noise reflects house buyers’ marginal willingness-to-pay (WTP) to avoid all the externalities from roads rather than just noise. Using these estimates in cost–benefit analyses (CBAs) of measures and policies that reduce noise only (and not these other externalities from road traffic) will then overestimate...
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