Question

Explain the two main forms of stated-preference non-market valuation. Discuss when and why you might choose to use one of them over the other.

Answer 1

There are two main forms of stated preference non market valuation.

Stated preference is used for mostly all types of valuation. It is a survey based evaluation wherein the respondents may be asked even hypothetical situations.

It is of two types

Contingent valuation and choice analysis

Contingent valuation: this is the type where referendum situation is given and respondents are asked about the willingness to pay for a good. This analyses how much an individual is willing to give for an environmental good which may as well be used by others.

Choice analysis: it is based on the form where choices are given and people are asked to rank them according to preferences.

The choice based analysis could be used where the willingness to pay is not directly asked upon. Also it is easier because the choices are to be ranked rather than questions answered, which is in contingent evaluation, Which might be long, tedious and monotonous.

Contingent valuation is an indepth analysis and might be used to know the actual willingness to pay. Its more precise than choice analysis, though may be lengthy.

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