The methodologies of
economic evaluation II
To show preferences for
environmental assets
1. METHODS BASED ON THE CURVE
OF QUESTION:
classification
2. THE METHOD OF THE TRIP COST
3. THE METHOD OF THE EDONIC
EVALUATION
METHODS BASED ON THE CURVE
OF QUESTION:
The curve of question can be reconstructed

On the base of the preferences declared by
the individuals

On the base of the already finished choices
on the market (revealed preferences)
Methods of preferences reveal
THE METHOD OF THE TRIP COST
It allows to reconstruct the curves of
individual question for The recreational
places (forests, parks, lakes, etc.) and to
determine accordingly the value
The “cost” of a visit to a place of
recreation include essentially
(besides the possible entry rate)
the cost of the trip , that can be
easily reconstructed noticing the
place of origin of the visitors.
If the cost of the trip is considered
and the number of annual visits
affected by every visitor is known,
they have all the elements to build
a curve of questions!
Generally, the visitors who come from near
places - lower cost of the trip do more visits than those who come from far
places - high cost of the trip - and therefore,
the curves of questions are tilted
negatively
But the question is not influenced only by the
price.
They also count:
- The income
- The number of available alternatives for
every visitor
- The personal preferences for a practice or
recreational activity
These added factors require
adjustments to the price-number
of visits relationship that allows the
estimation of question curve
The total economic value of the place can be
estimated individualizing the paid cost and the
visits affected by the visitor, quantifying his
average expenses and multiplying it by the
total number of visitors.
Problems

Time Costs

Multiple visits during the trip

Substitutive places

Decision of a residence acquisition

Visitors that do not pay
Time Costs
Are we sure that the only costs of a trip are the
expenses of transportation (fuel etc)? The time
also has a value that must be quantified
As the trip is long, more time is lost
if we do not consider this factor, the value is
underestimated.
But how can we evaluate the
time ?
There is no commonly
approved methodology
For some individuals contrarily the time
consumed in transportation can have a
recreational value or being a benefit that should
be subtracted from the cost of the trip.
... But also in this case there is
difficulty in evaluating the
benefit related to the time of
transportation.
Trips with multiple visits
If they visit more places during the travel,
how can they divide the cost between the
different places?
Can happen that single room visit does
not justify the cost of the journey.
In such case the conventional approach is
to ask the visitor to distribute the costs
between the different places
an innatural operation that introduce wide
possibilities of error and arbitrariness
SUBSTITUTIVE PLACES
The fact to cross x km and sustaining
the corresponding costs can be
associated to contexts of very different
choice according to the available
alternatives for the individuals.
The recreational value attributed by an
individual that chooses a place
between many available and another
that doesn't have alternatives evening
but this method is not able to
discriminate between the two
situations!
ACQUISITION OF A RESIDENCE
It is possibile that the individual
who like a place acquire a
residence in it, with consequent
low costs.
In such case the recreational value
would be notably underestimated
How to reach a comparable
evaluation to that of the
‘pendulum-like’ visitors ?
VISITORS THAT DO NOT
PAY
There are visitors who for different
reasons don't bear costs of travel and
that can attribute a very elevated
recreational value to the place!
CONCLUSION
The validity of the method of the trip
costs is based on the hypothesis that
high costs furnishes a reliable respect
of the recreational value
Very less this is true, very more the
method results are unreliable
requiring corrections that can distort
some results with arbitrary
adjustments.
THE EDONIC EVALUATION
METHOD
This method based on a criterion of
evaluation (typical of the real estate market)
that decomposes property in a certain
number of characteristics giving each its
“edonic” weight
In the real estate market, the
environmental quality is certainly an
edonic factor of relief, it becomes possible
to use the data of market as indirect
source of respect of the environmental
quality
Away from the non-environmental edonic
conditions - number of rooms, surface,
number of services, accessibility etc. -
the difference of quotation of market of
two buildings will be in fact due to the
differences of environmental quality.
In the first case, the estimation of the
damage is naturally equal to the loss of
the real estate value suffered by the
interested area
PROBLEMS
The applicability of the method is
conditioned from its need to prepare
detailed data that influence the real
estate prices
The method is based on the hypothesis
of the free choice of every possible data
from the users based on the income
If so it was not the prices that could not
reflect the evaluation of every
characteristic carefully
But the prices of real estate suffer from a
notable distortions of physical,
financial, technical (not all the possible
combinations are productable in every
context), and institutional nature
But if it is so, the edonic
evaluation should not care about
some structure of the question only,
but also of the offer, with notable
complications!