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A Choice Modelling Approach for Assessment of Use and Quasi-Option Values in Urban Planning for Areas of Environmental Interest

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Author Info

  • Elisabetta Strazzera

    (University of Cagliari)

  • Elisabetta Cherchi

    (DIT and CIREM, University of Cagliari)

  • Silvia Ferrini

    (DEPFID, University of Siena, CSERGE and University of East Anglia)

Abstract

This study adopts a discrete choice modelling methodology to evaluate individuals’ preferences over planning alternatives for an urban site of environmental interest. Since such projects involve some uncertainty and irreversibility, a special attention is devoted to the estimation of the quasi-option values which are associated to project development. Two distinct measures for the quasi-option value are estimated, and both coefficients indicate that the public places a significant value on reduction of the possibility of adverse irreversible effects: a more prudent development strategy is valued about four times more than a procedure that provides a lesser hedge against undesired outcomes. Furthermore, the study involved elicitation of intertemporal preferences over projects with different time spans, and estimation of the implicit discount rates: the values obtained seem high if compared to standard discount rates applied to public projects, but not far from current interest rates on consumption.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2008.63.

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Date of creation: Jul 2008
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Handle: RePEc:fem:femwpa:2008.63

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Related research

Keywords: Urban Planning; Environmental Values; Choice Modelling; Use Values; Quasi-option Values; Discounting;

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  1. Keller, L Robin & Strazzera, Elisabetta, 2002. " Examining Predictive Accuracy Among Discounting Models," Journal of Risk and Uncertainty, Springer, vol. 24(2), pages 143-60, March.
  2. Fisher, Anthony C., 2000. "Investment under uncertainty and option value in environmental economics," Resource and Energy Economics, Elsevier, vol. 22(3), pages 197-204, July.
  3. Jay Corrigan & Catherine Kling & Jinhua Zhao, 2008. "Willingness to Pay and the Cost of Commitment: An Empirical Specification and Test," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 40(2), pages 285-298, June.
  4. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  5. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, October.
  6. Ferrini, Silvia & Scarpa, Riccardo, 2007. "Designs with a priori information for nonmarket valuation with choice experiments: A Monte Carlo study," Journal of Environmental Economics and Management, Elsevier, vol. 53(3), pages 342-363, May.
  7. Cherchi, Elisabetta & Ortúzar, Juan de Dios, 2006. "On fitting mode specific constants in the presence of new options in RP/SP models," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(1), pages 1-18, January.
  8. Revesz, Richard L. & Stavins, Robert N., 2007. "Environmental Law," Handbook of Law and Economics, Elsevier.
  9. Hanemann, W. Michael, 1989. "Information and the concept of option value," Journal of Environmental Economics and Management, Elsevier, vol. 16(1), pages 23-37, January.
  10. Lind, Robert C., 1990. "Reassessing the government's discount rate policy in light of new theory and data in a world economy with a high degree of capital mobility," Journal of Environmental Economics and Management, Elsevier, vol. 18(2), pages S8-S28, March.
  11. V. Bosetti & J.M. Conrad & E. Messinat, 2004. "The Value of Flexibility: Preservation, Remediation, or Development for Ginostra?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 29(2), pages 219-229, October.
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