Edited by Stephane Hess and Andrew Daly
Chapter 9: The discrete choice experiment approach to environmental contingent valuation
Assessing the economic desirability of environmental policies requires estimating the value of non-market commodities. In response, several valuation techniques have been developed since the 1960s. They utilize two general data sources – revealed and stated preference data. The former refers to situations where people’s choices are observed in actual market situations. Conversely, stated preference data refers to situations in which choices are observed in a survey context. Stated preference (SP) methods allow collection of information about respondent preferences for the environmental amenities of interest by observing choices in hypothetical situations presented in a survey. Observed choices are contingent on scenarios posed in the survey and the environmental economics literature commonly uses the term contingent valuation (CV) to describe the process of utilizing stated preference data for valuation. Additionally, there are many different ways to elicit preference information in a CV study and the one most commonly used are discrete choice experiments (DCE). Contingent valuation is an inherently more flexible tool than revealed preference (RP) techniques, such as hedonic pricing, averting behavior and the travel cost method, because in principle it is possible to use it to examine preferences for provision levels of goods that are substantially different from those currently observed or those observed in the past.
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