The Role of Stated Preference Valuation Methods in Understanding Choices and Informing Policy

This article examines the role of stated preference (SP) valuation methods in the environmental economist's toolbox. Overall, the article makes the case for using SP methods in a wide range of settings, showing how the approach can be used to both inform policy and gain a better understanding of people's choices and preferences. First, we provide an overview of SP methods and discuss a number of policy design issues where we believe SP methods have advantages over alternative approaches. The ability of SP to overcome "hypothetical market bias" is briefly reviewed. Next, we discuss how SP methods can be used to address research issues concerning people's preferences and choices, which have broader implications for economics and behavioral sciences. These research issues are (1) the effects of information, learning and knowledge; (2) testing the validity of the standard model of consumer choice; (3) the influence of behavioral drivers such as social norms; and (4) the role of "deep" determinants of preference heterogeneity such as emotions and personality. Finally, we identify some research areas where SP methods may be particularly useful in the future.