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Revealed preference methods

Revealed preferences methods (RP) are applicable only for measuring the value of goods and services that are indirectly related to market behavior. These methods aim to measure individuals’ willingness-to-pay (WTP) indirectly by studying their actual choices. Common RP methods are travel cost method and hedonic price method.

Travel cost method can be applied to measure the value of cultural service provided by a particular recreational site. The economic value can be estimated by the number of trips the respondents have made to the site in a particular time period, the distances to the site from their home, and the amount of time they have spent at the site. Usually, information is collected through a survey conducted either by telephone, mail or on-site interviews.

  • A Baltic example of a travel cost study: Soutukorva (2001) studied how a one meter improvement of mean sight depth in Stockholm Archipelago affects the recreational benefits.

Hedonic pricing method is based on the idea that the price of a house reflects the characteristics of a house and its environments, e.g. the number of rooms, age of house, location and environmental factors such as noise and aesthetic views. Hedonic price method measures how much environmental amenities directly affect market prices.

  • A Baltic example of the hedonic pricing method: Artell (2011) studied the effect of water quality on summer house prices in Finland.

 

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