The International Handbook on Non-Market Environmental Valuation
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The International Handbook on Non-Market Environmental Valuation

Edited by Jeff Bennett

Non-market environmental valuation (NMEV) is undergoing a period of increased growth in both application and development as a result of increasing recognition of the role of economics in environmental policy issues. Against this backdrop, The International Handbook on Non-Market Environmental Valuation brings together world leaders in the field to advance the development and application of NMEV as a tool for policy-making.
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Chapter 11: Estimation of Household Water Demand with Merged Revealed and Stated Preference Data

Jeremy Cheesman and Jeff Bennett


Jeremy Cheesman and Jeff Bennett INTRODUCTION The practice of merging revealed preference (RP) and stated preference (SP) data in order to estimate demand and non-market values has gained credence in the resource and environmental economics literature since the approach was first used in Cameron (1992) and Adamowicz et al. (1994). The merging of RP and SP data provides several advantages to the researcher (Whitehead et al., 2008) ● ● ● ● ● SP data can be used to extend RP datasets to situations that have not been observed previously. merging SP and RP data can alleviate estimation issues of multicollinearity and endogeneity that may confound econometric estimation when only RP data is used (von Haefen and Phaneuf, 2008). a panel dataset is created when the RP data of an individual is merged with at least one SP observation from the same individual. This Merging generally improves estimation efficiency, all other factors constant. RP data can be used to identify and control response bias in SP data through the identification of whether the individual has used the same underlying preference structure in their observed behaviour, and in the formation of their stated preferences. Studies that have combined stated and revealed preference data come predominantly from the literature on the estimation of recreation travel demand, marketing, and the valuation of environmental services. Whitehead, et al. (2008) provide a comprehensive synthesis of this research. Resource and environmental economics literature that merges RP and SP data generally concentrates on how historical and hypothetical exogenous variations in the quantity or...

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