Some resources not traded in markets are related in consumption to goods that are traded in markets. This relationship, known as revealed preference, can be used to estimate use values. Revealed preference methods can be used to estimate direct use values.
Hedonic price method
The hedonic price method is typically used to estimate the values of air
quality and other locational amenities and job risks. It uses information on
people's job and location choices to estimate marginal willingness to pay for
resource allocation changes. In a multi-market context, marginal willingness to
pay is equal to the sum of wage and price differentials generated from labor and
land markets.
Travel cost method
The travel cost method is typically used to value the benefits of recreation
trips and sites, among other things. It begins by assuming that the travel and
time cost is the implicit price of a recreation trip. Then a recreation demand
curve can be determined by plotting travel costs against the number of trips.
The benefit of recreation sites is equal to the consumer surplus. The benefit of
recreation trips is equal to the consumer surplus for the site divided by the
number of trips.
Averting behavior method
The averting behavior approach is typically used to value the benefits of
health. It assumes that expenditures on averting (i.e., defensive) behavior is a
lower bound on the value of avoiding the medical condition.
Stated Preference Methods
Stated preference methods rely on hypothetical questions. Stated preference methods can be used to estimate direct use values. One of these, the contingent valuation method, is the only method that can be used to estimate indirect use values.
Contingent Valuation
The contingent valuation method is a survey approach that asks directly for
willingness to pay information. The method is called "contingent" valuation
because it uses information from how people they would behave given certain
hypothetical situations, contingent on being in the real situation. Contingent
valuation surveys ask questions such as "how much would you be willing to pay in
higher taxes to obtain a 10% improvement in water quality?"
Contingent Behavior
The contingent behavior method uses responses to hypothetical questions about
resource use to supplement revealed preference data from revealed preference
methods. Contingent behavior surveys ask questions such as "how many recreation
trips would you take with a 10% improvement in water quality?"