Department of Treasury and Finance (Victoria) (2013) Economic Evaluation for Business Cases Technical Guidelines. Available at: HM Treasury (2011), The Green Book Appraisal and Evaluation in Central Government. – . The Stationery Office, London. Available at: Appendix A: Summary of common techniques used to monetise non-market values Technique Data Advantages Disadvantages Hedonic Property prices and Based on market Complex to implement and pricing characteristics of good prices interpret (Revealed Accounts for Does not capture non-use different land use Preference) values decisions Requires large data sets to control for other variables that affect price Travel cost Survey users of a site about Based on actual Does not capture non-use method their monetary and travel time behaviour of people and option values costs, distance travelled; also (Revealed Relatively May be biased by base need regional population assumption of equal Preference) inexpensive method opportunity and travel costs Results generally across individuals easy to interpret Difficult to apply when there are multiple reasons for making a trip (i.e. how to attribute the demand to travel when there are multiple attractions at a destination) Contingent Survey that presents a Highly flexible can Complex and expensive to – valuation scenario and elicits be used to estimate apply method willingness to pay the economic value Potentially affected by a of both use and (Stated range of respondent biases values Preference) which must be removed / Willingness to pay data is controlled via specific generated from the technique techniques and methods itself, after a specific scenario is presented to a respondent. May be via protest ‘gamed’ responses or unrealistically high bids Sensitive to framing of the survey and information provided e.g. initial bids, indicative values, type and amount of information given to respondents
Department of Treasury and Finance (Victoria) (2013) Economic Evaluation for Business Cases Technical Guidelines. Available at: HM Treasury (2011), The Green Book – Appraisal and Evaluation in Central Government. The Stationery Office, London. Available at: . Appendix A: Summary of common techniques used to monetise non-market values Technique Data Advantages Disadvantages Hedonic pricing (Revealed Preference) Property prices and characteristics of good Based on market prices Accounts for different land use decisions Complex to implement and interpret Does not capture non-use values Requires large data sets to control for other variables that affect price Travel cost method (Revealed Preference) Survey users of a site about their monetary and travel time costs, distance travelled; also need regional population Based on actual behaviour of people Relatively inexpensive method Results generally easy to interpret Does not capture non-use and option values May be biased by base assumption of equal opportunity and travel costs across individuals Difficult to apply when there are multiple reasons for making a trip (i.e. how to attribute the demand to travel when there are multiple attractions at a destination) Contingent valuation method (Stated Preference) Survey that presents a scenario and elicits willingness to pay Willingness to pay data is generated from the technique itself, after a specific scenario is presented to a respondent. Highly flexible – can be used to estimate the economic value of both use and values Complex and expensive to apply Potentially affected by a range of respondent biases which must be removed / controlled via specific techniques and methods May be ‘gamed’ via protest responses or unrealistically high bids Sensitive to framing of the survey and information provided e.g. initial bids, indicative values, type and amount of information given to respondents
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