May be used to estimate economic
benefits or costs associated with:
¥ environmental quality, including air pollution, water pollution, or noise
¥ environmental amenities, such as aesthetic views or proximity to recreational
sites
May used to estimate the value of
environmental amenities that affect prices of marketed goods:
¥ use residential housing prices to estimate the value of
environmental amenities.
¥ based on the assumption that people value the characteristics
of a good, or the services it
provides, rather than the good itself.
¥ prices will reflect the value of a set of characteristics,
including ES, that people consider
important when purchasing the good.
Data needs:
¥ cross-section and/or time-series data on property values, and
household characteristics
¥ index of ES/environmental quality
¥ use multiple regression
Complications:
¥Non linear prices
¥Auto-correlation