Question

Which of the following valuation method/approach is being used to value wild life and recreational benefits of protected areas.

• A. Contingent Valuation Method
• B. Market Price Valuation
• C. Production Function Approach
• D. Surrogate Market Approach

Hint:

The Contingent Valuation Method is unique because it is the only economic technique capable of measuring "existence value"---the value people derive simply from knowing a species or natural area exists, even if they never visit it.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
This environmental economics question addresses how to assign economic value to non-market ecological benefits, such as wildlife conservation and recreational experiences in national parks.

Step 2: Detailed Explanation:
Let us examine the listed economic valuation approaches:
1. Contingent Valuation Method (CVM):
CVM is a direct survey-based stated preference technique.
It is used to value non-market environmental resources by establishing a hypothetical market.
Surveys ask respondents about their "Willingness to Pay" (WTP) to conserve wildlife or protect a natural habitat, or their "Willingness to Accept" (WTA) compensation for its loss.
Because it captures non-use values (such as existence and bequest values), it is widely used to evaluate wildlife and recreational benefits in protected areas.
2. Market Price Valuation:
This method relies on actual market transactions.
Since clean air, scenic views, and wildlife habitats are not traded directly in commercial markets, this approach is insufficient on its own.
3. Production Function Approach:
This treats environmental resources as inputs in a production process (e.g., forest watershed quality supporting agricultural irrigation downstream).
It does not easily capture the intrinsic or recreational value of wildlife.
4. Surrogate Market Approach:
This includes methods like the Travel Cost Method (TCM), which estimates recreational value based on visitors' travel expenses.
While useful, it only measures active use value, whereas CVM is comprehensive enough to capture both active use and non-use (preservation) values.

Step 3: Final Answer:
The Contingent Valuation Method is the primary direct stated preference approach used for valuing non-market benefits like wildlife and wilderness preservation.
This matches Option (A).