Students / Subjects

Handbook >> Environmental Economics >> Valuation >> Techniques for Valuation of Environmental Goods >>

Valuation Techniques: Revealed Preference

Revealed Preference Methods 

It is meant to document actual behavior of individuals and as such considered more empirical than the hypothetetical Stated Preference Methods

Hedonic Pricing Methods

Looks at trends in market pricing across different geographic locations in order to infer the value of different quantities of environmental goods each location holds. It does this by comparing prices between the different housing markets, then inferring how the differences in environmental quality are implicit in the price differentials. It requires for all people involved in the housing transactions to be well informed and that the market to be in equilibrium.Plus, it's limited to only those environmental goods that are able to be linked to the housing market, which isn't all of the environmental qualities.

Travel Cost Models

The examination of people's travel-costs (natural park fees, transportation costs etc.) is used to infer the consumer surplus and WTP of travelers to locales linked to environmental goods.

As with every method, there are some problems associated with the Travel Cost Method.

  • If there are close substitutes to the environmental good- either geographically close like the proximity of parks or the substituting in that other goods give same level of utility- makes this technique more complex.
  • The value of vacation time is varies with different people. Related to this, leisure is time is hard to measure.
  • Doesn't account for non-use (existence) values; only includes people who travel to sites
Next:Production Function
Back to Valuation
Copyright 2006 Experimental Economics Center. All rights reserved. Send us feedback