Download Nonmarket Values

Nonmarket Values
Property, ideas and experiences
can have “value” even if not
exchanged in a market.
Market Based Value
Price
($/Q)
P & Q where S = D maximizes
consumer and producer surplus
Supply
Consumer
Surplus
P*
Producer
Surplus
Demand
Q*
Quantity
Total Economic Value
Nonuse Value
Use Value
Direct Use
Consumptive
Use
Indirect Use
Option
Nonconsumptive
Use
Existence
Bequest
Why Are Nonmarket Values Needed
• Allocation of resources
– Budgeted
– Regulatory
• Reduced resource use
– Avoidance of costs
Ways to Measure
• Willingness to make tradeoffs, sacrifices, or
pay directly
– Measure with a simulated market (stated
preference)
– Observe actual behavior (revealed preference)
Hedonic Modeling
• Statistically isolate the effect of differences in
the characteristics and contexts of a category
of property
– Price = f (positive attributes, negative attributes)
– Subject property
• Urban houses
• Building lots
• Recreation areas
Travel Cost Model
• Used to value recreation areas
– Based on out-of-pocket and opportunity cost to
travel to a destination
• Zonal
• Individual
– Costs that can be added
• Entrance fee
• Equipment
• License – hunting, fishing
Stated Preference
• A direct measurement
• Willingness to pay
– Amount individual would be willing to pay to
engage in a defined activity
• Willingness to accept
– Amount individual would accept in payment for
not doing something
Contingent Valuation Model
• Setup a hypothetical market
– Describe characteristics of the thing or
opportunity for sale
– Describe attributes of the market
– Individual states what they would pay for the
thing or opportunity
– Survey techniques used
– Many potential biases