7/23/2019 methods of economic valuation.pdf

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Choice of methods of economic valuation

Broadly, economic approaches to natural resources and biodiversity valuation consist of

three procedures: 

 Using market prices where the prices occur in the market for the environmental goods and

services, and where prices are ‘revealed’ in some other market- the revealed preference

approach (also called indirect approach).

 Using willingness to pay estimates derived from questionnaires -the stated preferenceapproach (also called direct approach).

 Using values ‘borrowed’ from existing studies - benefits transfer.Revealed preferrence methods are used where conventional or proxy market prices exist

and while stated preference are employed through contructions of hyopthetical markets.

Further, the market-based or revealed preference approaches are divided:

- The observed market value and related goods approach.

- The productivity approach.- Cost-based methods including replacement cost.