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

Author

Listed:
  • 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.

Suggested Citation

  • Elisabetta Strazzera & Elisabetta Cherchi & Silvia Ferrini, 2008. "A Choice Modelling Approach for Assessment of Use and Quasi-Option Values in Urban Planning for Areas of Environmental Interest," Working Papers 2008.63, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2008.63
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    References listed on IDEAS

    as
    1. Jinhua Zhao & Catherine L. Kling, 2004. "Willingness to Pay, Compensating Variation, and the Cost of Commitment," Economic Inquiry, Western Economic Association International, vol. 42(3), pages 503-517, July.
    2. Keller, L Robin & Strazzera, Elisabetta, 2002. "Examining Predictive Accuracy Among Discounting Models," Journal of Risk and Uncertainty, Springer, vol. 24(2), pages 143-160, March.
    3. Kenneth J. Arrow & Anthony C. Fisher, 1974. "Environmental Preservation, Uncertainty, and Irreversibility," Palgrave Macmillan Books, in: Chennat Gopalakrishnan (ed.), Classic Papers in Natural Resource Economics, chapter 4, pages 76-84, Palgrave Macmillan.
    4. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, January.
    5. 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 8-28, March.
    6. Mensink, Paul & Requate, Till, 2005. "The Dixit-Pindyck and the Arrow-Fisher-Hanemann-Henry option values are not equivalent: a note on Fisher (2000)," Resource and Energy Economics, Elsevier, vol. 27(1), pages 83-88, January.
    7. 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.
    8. 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.
    9. Jay Corrigan & Catherine Kling & Jinhua Zhao, 2008. "Willingness to Pay and the Cost of Commitment: An Empirical Specification and Test," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 40(2), pages 285-298, June.
    10. 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.
    11. V. Bosetti & J.M. Conrad & E. Messinat, 2004. "The Value of Flexibility: Preservation, Remediation, or Development for Ginostra?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 29(2), pages 219-229, October.
    12. 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.
    13. 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.
    14. Revesz, Richard L. & Stavins, Robert N., 2007. "Environmental Law," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 1, chapter 8, pages 499-589, Elsevier.
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    Cited by:

    1. Elisabetta Strazzera & Elisabetta Cherchi & Silvia Ferrini, 2010. "Assessment of Regeneration Projects in Urban Areas of Environmental Interest: A Stated Choice Approach to Estimate Use and Quasi-Option Values," Environment and Planning A, , vol. 42(2), pages 452-468, February.

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    More about this item

    Keywords

    Urban Planning; Environmental Values; Choice Modelling; Use Values; Quasi-option Values; Discounting;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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