What method is used to estimate monetary values for nonmarket goods?

Contingent valuation is a method that assesses people's willingness to pay for nonmarket goods, such as environmental benefits or public services that do not have a direct market price. This approach typically involves surveys where individuals are asked how much they would be willing to pay for specific environmental improvements or how much compensation they would require to accept a loss of environmental quality. The responses help estimate the economic value of these goods, which is important for informed decision-making regarding resource management and policy development.

By using contingent valuation, policymakers and researchers can gain insights into the economic preferences and values that societies place on nonmarket goods, thereby facilitating more effective allocation of resources and better environmental protection strategies. This method contrasts with others, like market-based policies, which rely on existing market transactions, or cost-effectiveness analysis, which measures the cost of achieving a specific outcome rather than valuing the outcome itself.