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Flashcards in Valuation methods Deck (7)
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1
Q

Benefit Cost Analysis (BCA)

A
  • Benefits of projects exceed cost

- time value of money; cost in future are less worth in the present

2
Q

pittfalls BCA

A
  1. double counting - cost/benefits accounted more than once
  2. proper accounting of opportunity cost
  3. sunk cost - cost that already have been done cannot be undone
  4. job cost - jobs has to be counted as cost/not benefit, opportunity cost –> labour could have been used for other value making processes
  5. taxes - tax revenue is a transfer, not relevant for BCA
3
Q

Hedonic Valuation Method (wages)

A
  • estimate Value of statistical Life
  • -> estimation of social net benefit of pollution control
  • uses statistical approach to estimate wage premium for taking a job with marginal higher risk of death

Disadvantages:

  • assumes workers accurately perceive risk
  • assumes workers in more risky jobs are no different to workers in less risky jobs
4
Q

Hedonic method (property)

A

estimate value of local environmental good
- uses statistical analysis to estimate price premium associated with the marginal increase of environmental good
disadvantages:
- correlation with other environmental goods make it difficult
- captures only the values capitalized in property

5
Q

Travel cost method

A
  • estimation of site specific environmental goods, where travel to the site is required
  • Treat travel cost to a site as the “price” for the site; use the fact that different site users pay different “prices” to estimate the site demand (MWTP) curve, and the value of changes in the site.
  • disadvantages:
  • not good for trips to multiple sites
  • not good for multi day trips involving multiple activities
6
Q

Contigent valuation method

A

estimate all types of environmental goods and services
- construct a demand curve by directly asking survey respondents about their willingness to pay for marginal increases in the goods

disadvantages:
- hypothetical bias
--> not the real WTP
- Respondent must clearly
understand the intervention
effect
7
Q

Value of statistical life

A
  • estimate of amount of money society is willing to pay to avoid a death of one life
  • basically can be seen as a WTP for a safer job