Hedonic Pricing is one of the economic valuation techniques which suitable be implemented to value environmental services. Can anyone share the experiences using this method?
Can you elaborate settlement preferences? How are you planning to measure it? May be that could be one of the explanatory variables? In hedonic model, you are predicting the changes in property prices that varies based housing and environmental attributes.
Yes, settlement preferences are the environmental attributes such as park, water quality, good environment, etc.
You can use distance to the park as one of the variables. How do you plan to measure good environment, and water quality? You could use dummy variable or categorical variable for these, but need a valid justification in my opinion. Hope this helps.
Hedonic pricing is a very useful tool, but it requires a market good that well represents the environmental attribute you are measuring. It is also important that the 'good' for valuation is known or 'seen' by the buyers in order to estimate legitimate values. This issue of information is what I write about in my 1992 paper on hedonic pricing. There are also several important econometric issues to address, however, I am not an expert in those. Hope this is useful.
Dear Yudi,
Based on my experience, I will give you an example. You want to know the aesthetic value of a beautiful lake by hedonic pricing. For this you will estimate the value of land surrounding the lake (some hundred metres from the lake, also depends on lake size) by survey. Then for the similar land i.e. same quality, same topograhpy similar distgance from the road, settelement etc. Obviously, the price of the land surrounding the lake will be higher than other one and it is due to lake beauty. The difference is the economic value of the aesthetics of the lake.. Hope this gives you some concepts.
I generally agree with Prof. Shrestha who responded. An excellent overview of the subject including citations to many relevant sources is: Freeman, A. Myrick III (2003) The Measurement of Environmental and Resource Values. Second Edition. Resources for the Future, Washington, DC.
Hi Yudi Wahyudin; following links could help you a lot.
http://www.jstor.org/stable/3439957
http://scotland.gov.uk/Resource/Doc/158818/0043124.pdf
Thanks
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