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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