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Monetary Valuation of the Environment

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Foundations of Environmental Economics

Part of the book series: Springer Texts in Business and Economics ((STBE))

Abstract

This chapter mainly considers the contingent valuation method (CVM) through which agents’ preferences for environmental quality are elicited by survey questions. After describing its microeconomic foundations, the advantages that this widely applied stated preference technique for environmental quality assessment has over revealed preference approaches are highlighted. The chapter then discusses the conceptual and practical problems of CVM studies focussing on the many decisions that evaluators have to make in the design of such studies. The limitations of this technique are pointed out, and it is shown how the quality and validity of CVM studies can be improved by observance of some thoughtful guidelines.

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Notes

  1. 1.

    The marginal rate of substitution is equal to the slope of the indifference curve and therefore it is negative. However, for simplicity reasons, the minus sign is frequently omitted. Mathematically correct would be to state above that the absolute value of the marginal rate of substitution must be equal to p.

  2. 2.

    Recall that in a household optimum, the absolute slope of the indifference curve has to equal the price ratio between the two goods and thus the value of the inverse Hicksian demand function.

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Authors and Affiliations

  1. University of Regensburg, Regensburg, Germany

    Wolfgang Buchholz

  2. TU Bergakademie Freiberg, Freiberg, Germany

    Dirk Rübbelke

Authors
  1. Wolfgang Buchholz
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  2. Dirk Rübbelke
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Buchholz, W., Rübbelke, D. (2019). Monetary Valuation of the Environment. In: Foundations of Environmental Economics. Springer Texts in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-16268-9_3

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