Contingent Valuation Method (CVM)
21st Dec 2018
Contingent Valuation Method
Suitability for the forest ecosystem services to be valued:
All forest services
Description of the method:
Contingent Valuation Method (CVM) is a questionnaire based technique that seeks to discover individual preferences for an environmental change. It uses one of two measures of consumer’s surplus: compensating variation (CV) or equivalent variation (EV). CV is the amount of money (change in income) necessary to make an individual indifferent with respect to an initial situation and a new situation with different prices. EV may be viewed as a change in income equivalent to a change in welfare after a change in prices has occurred. CVM is used to estimate the consumer’s willingness to pay (WTP) for a specified good or service, or his/her WTA compensation for forgoing a desired good or service. In practice, it is usually derived from the responses of potential consumers to a hypothetical exchange situation.
The method assumes that the consumer’s expressed WTP in a hypothetical situation is a utility indicator to the consumer in an actual situation. The basic premise of the contingent valuation method is that individuals are sensitive to a given environmental change and that their preferences could be measured in terms of their WTP to undergo (or their WTA a compensation to avoid) this change. Therefore, the given change is presented to individuals through a survey where the environmental change is presented and where people are directly asked to state their WTP or their WTA the given environmental change.
The most used variants of CVM are Open-ended, Dichotomous or Polychotomous choice, Iterative bidding game, and Payment card.
Benefits of the method:
Measurement of non-use values possible (to provide a comprehensive measure of total economic value)
Valuation of future goods and services possible
The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices
The use of surveys allows to estimate hypothetical changes and their impact before they have taken place
Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results
Limitations of the method:
Results sensitive to numerous sources of bias in survey design and implementation
Preferences for non-use values tend to be less stable
Budget and time demands are high