The economic concept of value determined by peoples willingness to make tradeoffs…
$
Marginal Cost
Consumer
Surplus
P*
Producer
Surplus
Willingness to Pay
Quantity

Use Value:
Values associated with the tangible use of non-market goods and services (e.g. recreation, health benefits of clean air…)

Nonuse (“passive”) Value:
Intrinsic values that are independent of use
• Existence (“preservation”) Value
• Bequest Value
• Altruistic Value
• Option Value

Indirect Methods (revealed preference)
Examine the market decisions people make regarding activities that are linked to nonmarket goods and services
Direct Methods (stated preference)
Elicit values directly from people using survey methods

Methods for Measuring Non-Market Values:
Indirect Methods
Hedonic Pricing Method
• people value the characteristics of goods air quality
People are willing to pay more for houses in areas with higher environmental quality

Methods for Measuring Non-Market Values:
Indirect Methods
Hedonic Pricing Method (applied to wages)
Income ($CN in 2000)
$33-$17k
$17-$22k
$27-$54k
$3-$13k
$27-$54k
People may be willing to accept lower wages in areas with abundant ecosystem services

Methods for Measuring Non-Market Values:
Indirect Methods
Hedonic Pricing Method
Application to forage land:
• Scenic amenities
•
Environmental quality (wildlife habitat, water,…)
• Access to recreation

Methods for Measuring Non-Market Values:
Indirect Methods
Hedonic Pricing Method
Advantages:
• Publicly available data
• Low cost
Disadvantages:
• Large data sets
• Sophisticated statistical models

Methods for Measuring Non-Market Values:
Indirect Methods
Travel Cost Method
• Measures the value of resources associated with recreation

Methods for Measuring Non-Market Values:
Indirect Methods
Travel Cost Method
1.
Ask visitors about their travel cost and number of trips
Estimated demand
2.
Estimate recreation demand
 consumer surplus trips
Value of recreation

Methods for Measuring Non-Market Values:
Indirect Methods
Travel Cost Method
3.
Estimate demand for alternative site with higher quality resources
4.
Non-market value = the additional surplus
Demand with high quality
Non-market Value
Demand with low quality trips

Methods for Measuring Non-Market Values:
Indirect Methods
Travel Cost Method
Advantages:
• Can be very specific (value or site)
Disadvantages:
• Primary data collection ($ and time consuming)
• Sophisticated statistical models

Methods for Measuring Non-Market Values:
Direct Methods
Contingent Valuation Conjoint Analysis
WTP for a change in quality
“Waterfowl habitat in ABC Census Division is currently highly degraded due to intensive row crop production. Waterfowl habitat could be enhanced by converting cropland to forage production. If 20% of the land were converted, waterfowl populations would increase by 1%.
Would you be willing to pay an additional $10 per year in property taxes if the money was used to convert cropland to forage for the purpose of improving waterfowl habitat?
Elicit values by directly asking people to state their willingness to pay for a non-market good

Methods for Measuring Non-Market Values:
Direct Methods
Contingent Valuation Conjoint Analysis
Hunting trip A
1. Water level is below the vegetation line
2. You see 2 ducks per hour
3. Entrance fee = $5
Select between alternative sets of characteristics
Hunting trip B
1. Water level is above the vegetation line
2. You see 6 ducks per hour
3. Entrance fee = $11
Elicit values by directly asking people to state their willingness to pay for a non-market good

Methods for Measuring Non-Market Values:
Direct Methods
Contingent Valuation and Conjoint Analysis
Advantages:
• Can measure non-use values
• No secondary data required
Disadvantages:
• Survey design
• Survey cost and time
• Stated vs. revealed preference

Methods for Measuring Non-Market Values:
Benefits Transfer
Uses the values estimated from existing studies
Value of waterfowl hunting
Study Region Time Frame Consumer Surplus/Trip
Cooper
Hammack &
Brown
California
Pacific
Flyway
1989
1972
$11.39 – $32.26
$36 - $103.03
Van Kooten Alberta 1993 $23.65

Methods for Measuring Non-Market Values:
Benefits Transfer
Challenges:
• Past studies must exist
• Activities, locations and populations must correspond

Methods for Measuring Non-Market Values:
Conclusions :
• Valuing non-market goods is hard
• Detailed studies can be expensive and time consuming
• Benefits transfer (if possible) can provide a policy relevant estimate for less time and money