This is really a specialized survey technique designed to overcome the speculative and isolated nature of expert opinions. When no money is involved, the approach becomes similar to the costless-choice method.
The choice indicates a person’s willingness to trade money for an increased level of an environmental good.
#REAL OPTIONS VALUATION FOR GREEN PROJECTS PLUS#
Each bundle might, for example, include a different sum of money plus varying levels of an environmental resource. The trade-off game method is a variant of the bidding game wherein respondents are asked to choose between two different bundles of goods. In an iterative (repeating) bid game the respondents are given a variety of bids to determine at what price they are indifferent between receiving (or paying) the bid or receiving (or losing) the environmental good at issue. In a single bid game the respondents are asked to give a single bid equal to their willingness to pay or willingness to accept compensation for the environmental good or service described. This method relates to a set of contingent valuation techniques that rely on the creation of a hypothetical market for some good or service. We will discuss trade-off game method, costless-choice method, and Delphi method as part of contingent valuation approach. This method is more effective when the respondents are familiar with the environmental good or service and have adequate information on which to base their preferences. This method puts direct questions to individuals to determine how much they might be willing to pay for environmental resources or how much compensation they would be willing to accept if they were deprived of the same resources. Contingent valuation frequently elicits information on willingness to pay or willingness to accept compensation for an increase or decrease in some usually non-marketed goods or services. Most survey-based techniques are examples of contingent valuation method. Contingent Valuation Method (CVM):Īnalytic survey techniques rely on hypothetical situations to place a monetary value on goods or services. Moreover, expressed preference techniques ask individuals explicitly how much they value an environmental good.
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These techniques avoid the need to find a complementary good (travel or house), or a substitute good (compensating wage rate), to derive a demand curve and hence estimate how much an individual implicitly values an environmental good.
The demand for environmental goods can be measured by examining individuals’ expressed preference for these goods relative to their demand for other goods and services. The following methods are used for environmental valuation: (A) Expressed Preference Methods:
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