It is based on the willingness to pay principle - in the absence of market prices, the most accurate measure of the value of a good or service is what people are willing to give up in order to get it. Shadow pricing is often calculated on certain assumptions and premises. As a result, it is subjective and somewhat imprecise and inaccurate.[1] The origin of these costs is typically due to an externalization of costs or an unwillingness to recalculate a system to account for marginal production.