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