, Volume 7, Issue 2, pp 177-197

Valuing environmental resources: A constructive approach

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The use of contingent valuation (CV) methods for estimating the economic value of environmental improvements and damages has increased significantly. However, doubts exist regarding the validity of the usual willingness to pay CV methods. In this article, we examine the CV approach in light of recent findings from behavioral decision research regarding the constructive nature of human preferences. We argue that a principal source of problems with conventional CV methods is that they impose unrealistic cognitive demands upon respondents. We propose a new CV approach, based on the value-structuring capabilities of multiattribute utility theory and decision analysis, and discuss its advantages and disadvantages.

The authors gratefully acknowledge that this material is based upon work supported by the Decision, Risk, and Management Science Program of the National Science Foundation under Grant Nos. SES 88-12707 and SES 90-22952 to Decision Research. We thank Ward Edwards, Charles Howe, John Kadvany, Ralph Keeney, Julie Irwin, John Payne, and Detlof von Winterfeldt for their insightful comments on an earlier draft of this manuscript. Any opinions, findings, and conclusions or recommendations expressed in this article are those of the authors and do not necessarily reflect the views of the National Science Foundation.