Question

Explain two potential problems involved in stated preference methods for environmental valuation. Use an example to explain what makes thismethod attractive despite the potential problems.

please state two problem only and use example

Answer 1

Stated preference method involves asking individuals questions, taking individuals through various questioners and collecting their responses in order to form a judgment or making conclusion or decisions.

This method has a few intrinsic problems as under

a) Hypothetical bias- Individuals to whom questions are asked can give misleading and no well thoughts answers. This will lead to incorrect inputs for making conclusion.

b) Strategic Bias- Here individuals can overstate ones true valuation affecting the collection of incorrect inputs for conclusion.

For example-

A chemical factory producing a very important and life saving drug but producing waste material which causes harm to people residing in nearby area where factory is located at. Here survey among people to locate factory to other location or not will have bias opinions such as workers employed by factory will not want relocation of factory however people who are not employed in the factory may want factory to be located in some other location.

Similarly, Governments’ initiative for affordable housing leads to destruction of Green Zones around the city in order to make more land available for residential construction. A survey to know public opinion on this will be collect inputs on the basis of beneficiary of the initiative by government at the same time people who are environment friendly will oppose the move for want of green Zones.

It is also possible that agencies conducting such survey can bribe or lure people to obtain desired opinions.

However this method remains popular because it involves people on grounds that are directly and indirectly stake holders of the project to be carried out.