APPRAISAL II_SCBA 2.1.pptx - Valuation Techniques in SBA Introduction • For an effective cost and benefit analysis it is key to understand the value

APPRAISAL II_SCBA 2.1.pptx - Valuation Techniques in SBA...

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Valuation Techniques in SBA
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Introduction For an effective cost and benefit analysis, it is key to understand the value of a specific project to people This is what will inform the decision of policy makers to know whether or not people would accept the project or not. There are three main valuation techniques in economics: Stated Preferences approach Revealed Preferences approach and The life satisfaction approach
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Stated Preferences approach SP approaches use simulated markets to elicit willingness to pay (WTP) or accept (WTA) values for changes in the environment or society. Appropriate for both use and non-use values Survey based methods in which respondents are presented with a hypothetical market describing the change in service provision
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Contingent Valuation Method (CVM) The contingent valuation method (CVM) is used to estimate economic values for all kinds of societal goods and services. CVM can be used to estimate both use and non use values. CVM is the most widely used method for estimating non-use values.
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CVM- Overview CVM involves directly asking people, in a survey, how much they would be WTP for specific societal goods or services. In some cases, people are asked for the amount of compensation they would be WTA to give up specific societal goods or services. It is called “contingent” valuation, because people are asked to state their WTP or WTA, contingent on a specific hypothetical scenario and description of the societal good or service.
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CVM-Overview CVM is referred to as a “stated preference” method, because it asks people to directly state their values, rather than offering values from actual choices, as the “revealed preference” methods do. CVM circumvents the absence of markets for some societal goods and service by presenting consumers with hypothetical markets in which they have the opportunity to pay or accept compensation for the societal good or service in question. The hypothetical market may be modelled after either a private goods market or a political market.
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The fact that CV is based on what people say they would do, as opposed to what people are observed to do, is the source of its greatest strengths and its greatest weaknesses. Contingent valuation is one of the very few ways to assign monetary values to non-use values of the society —values that do not involve market purchases and may not involve direct participation. These values are sometimes referred to as “passive use” values.
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They include everything from the basic life support functions associated with ecosystem health or biodiversity, to the enjoyment of a scenic vista or a wilderness experience, to appreciating the option to fish or bird watch in the future, or the right to bequest those options to your grandchildren.
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CVM- Design: Step 1 The first step is to define the valuation problem.
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  • Fall '19
  • Dr William Godfred Cantah

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