Environmental Resource Valuation: Some Problems of Specification and Identification
Three significant characteristics of resource consumption are introduced into the decision-making process: time costs of consumption; a costly access activity; and, mutual exclusivity of (some) consumption activities. It is seen that when these factors are ignored approaches based upon estimation of a resource demand relationship are likely to yield either overestimates of a resource’s value or no useful information at all. The difficulties identified here are shown to be directly relevant to the Travel Cost Method, and to be distinct from identification problems previously discussed in the literature. While the analysis suggests that the Contingent Valuation Method may be necessary to obtain useful estimates of resource values, it is shown that this approach, as commonly applied, does not yield the marginal evaluation information essential for policy prescription.