Inputs, resources, skills Method/technique When best used or avoided Strengths Weaknesses Assumptions, risks required Revealed preference methods – Useful to evaluate Useful when there are close Sensitive to model specification, Assumes values can be May be undertaken by a These methods estimate the market losses (eg, loss of comparators of similar including choice of functional reasonably approximated range of persons with value of a non-market good or recreation value in a river) patterns or processes which forms. by some relevant appropriate background service based on observed or justify the replacement may reliably be drawn on. behaviour. information. Limited/narrow application. behaviour toward some closely of public goods and connected marketed good or services. Can only be applied when service. For example, using relevant market data is available Can be used when suitable travel costs to infer the value of and consumer/producer market data (closely recreation or the experience of behaviour can be observed. connected to the cultural/heritage sites, based on market good or service) is the cost of travel to those sites. available. Hedonic pricing infers the value of individual attributes of a market commodity. e.g., the value people implicitly pay for housing with reduced earthquake risk or expansive views. Stated preference methods – Best used when there is no Capable of capturing current Studies can be very difficult to Must be carefully designed Requires specialist expertise These methods utilise surveys suitable or proxy market and future use values as well as implement and are complex. to avoid biases. in state preference or experiments to elicit what data to portray consumer non-use values (bequest and techniques. Respondents can would hypothetically be paid for intentions. existence values). Wide misrepresent real Primary surveys must be values which are not traded on applicability. preferences in an attempt undertaken with markets. They are simulated Choice modelling has gained to anticipate the outcome comprehensive design and approaches and are used in the popularity over contingent of the study/process. pre-testing. absence of data to valuation in recent years. portray consumer intentions. contingent valuation uses Choice modelling in particularly surveys to elicit the monetary can provide a rich data set of value people are willing to pay information directly applicable to avoid a decrement of some to policy objectives. type of non-market good or service, or the value they are willing to accept in exchange for its deterioration. In choice
Method/technique When best used or avoided Strengths Weaknesses Assumptions, risks Inputs, resources, skills required Revealed preference methods – These methods estimate the value of a non-market good or service based on observed behaviour toward some closely connected marketed good or service. For example, using travel costs to infer the value of recreation or the experience of cultural/heritage sites, based on the cost of travel to those sites. Hedonic pricing infers the value of individual attributes of a market commodity. e.g., the value people implicitly pay for housing with reduced earthquake risk or expansive views. Useful to evaluate losses (eg, loss of recreation value in a river) or justify the replacement of public goods and services. Can be used when suitable market data (closely connected to the good or service) is available. Useful when there are close comparators of similar patterns or processes which may reliably be drawn on. Sensitive to model specification, including choice of functional forms. Limited/narrow application. Can only be applied when relevant market data is available and consumer/producer behaviour can be observed. Assumes values can be reasonably approximated by some relevant market behaviour. May be undertaken by a range of persons with appropriate background information. Stated preference methods – These methods utilise surveys or experiments to elicit what would hypothetically be paid for values which are not traded on markets. They are simulated approaches and are used in the absence of market data to portray consumer intentions. contingent valuation uses surveys to elicit the monetary value people are willing to pay to avoid a decrement of some type of non-market good or service, or the value they are willing to accept in exchange for its deterioration. In choice Best used when there is no suitable or proxy market data to portray consumer intentions. Capable of capturing current and future use values as well as non-use values (bequest and existence values). Wide applicability. Choice modelling has gained popularity over contingent valuation in recent years. Choice modelling in particularly can provide a rich data set of information directly applicable to policy objectives. Studies can be very difficult to implement and are complex. Must be carefully designed to avoid biases. Respondents can misrepresent real preferences in an attempt to anticipate the outcome of the study/process. Requires specialist expertise in state preference techniques. Primary surveys must be undertaken with comprehensive design and pre-testing.
guide-to-section-32-of-resource-manangemnt-amendment-act-1991.docx