Contingent valuation method, Public Economics

Contingent  Valuation Method

In this method we construct a hypothetical market for a particular environmental function. This is an interview-based method where respondents are asked their willingness-to-pay (in monetary terms) for continuation of the environmental function. Alternatively some studies measure the willingness- to-accept for foregoing the environmental function. Here the consumers are compensated for the change in the environmental service. There are certain conceptual problems associated with this method. First, the willingness to pay should not be taken as the willingness to accept; usually the latter is higher than the former.

Moreover, both these terms do not imply the same property rights. Secondly, the persons interviewed are hypothetical consumers. They may not be aware of the benefits of the environmental function. If they were actually asked to make payment, their behaviour would be different. Thus it is sensitive to numerous biases in survey design and implementation. In recent years this method has become quite popular. In Indian situations this method has been applied by Hadker et al. (1997) for measurement of recreational and educational value of Borivli National Park in Mumbai, by James and by Murty (1998) for the cost of water pollution of the river Ganga, and by Murty and Menkhaus (1994) for valuation of ecotourism in Koladeo national park.

Posted Date: 12/18/2012 5:37:22 AM | Location : United States







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Public Economics can broadly be understood as that Economics which deals withpublic intervention in the economy. Its domain is supposed to encompass rationalefor public interventio