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A Primer on Nonmarket ValuationSubstitution Methods

A Primer on Nonmarket Valuation: Substitution Methods [This chapter covers two nonmarket valuation methods founded on the concept of substitution—the replacement cost method and equivalency analysis. Both methods are widely applied but frequently misunderstood. The replacement cost method is commonly used to value ecosystem services, and equivalency analysis is typically employed to determine required compensation for natural resource losses. The chapter describes and contrasts the methods, clarifies when (and when not) to apply them, illustrates the steps of a successful application, and provides examples of past applications. The reader will gain an appreciation of when the methods can provide a valid measure of economic value, and alternatively when the methods more usefully provide only a measure of cost. Following the guidance provided here can enhance the credibility of empirical applications of substitution methods.] http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png

A Primer on Nonmarket ValuationSubstitution Methods

Part of the The Economics of Non-Market Goods and Resources Book Series (volume 13)
Editors: Champ, Patricia A.; Boyle, Kevin J.; Brown, Thomas C.
Brown, Thomas C.
A Primer on Nonmarket Valuation — Feb 11, 2017
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Publisher
Springer Netherlands
Copyright
© Springer Science+Business Media B.V. (outside the USA) 2017
ISBN
978-94-007-7103-1
Pages
347 –390
DOI
10.1007/978-94-007-7104-8_9
Publisher site
See Chapter on Publisher Site

Abstract

[This chapter covers two nonmarket valuation methods founded on the concept of substitution—the replacement cost method and equivalency analysis. Both methods are widely applied but frequently misunderstood. The replacement cost method is commonly used to value ecosystem services, and equivalency analysis is typically employed to determine required compensation for natural resource losses. The chapter describes and contrasts the methods, clarifies when (and when not) to apply them, illustrates the steps of a successful application, and provides examples of past applications. The reader will gain an appreciation of when the methods can provide a valid measure of economic value, and alternatively when the methods more usefully provide only a measure of cost. Following the guidance provided here can enhance the credibility of empirical applications of substitution methods.]

Published: Feb 11, 2017

Keywords: Replacement cost method; Alternative cost method; Resource equivalency analysis; Habitat equivalency analysis; Substitutes; Valuation; Resource losses; Resource compensation; Public project; Natural resource damage assessment

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