ABSTRACT
The ultimate aim of a contingent valuation survey is typically to obtain an accurate estimate of the benefits (and sometimes the costs) of a change in the level of provision of some public good, 1 which can then be used in a benefit-cost analysis. In order to do this, the survey must simultaneously meet the methodological imperatives of survey research and the requirements of economic theory. To meet the methodological imperatives requires that the scenario be understandable and meaningful to the respondents and free of incentives which might bias the results. To meet the requirements of economic theory—the subject of this chapter and the next—a survey must obtain the correct benefit measures for the good in the context of an appropriate hypothetical market setting. In this chapter we review the theoretical underpinnings of the contingent valuation method.
