A method of economic evaluation, based on the premise that the price of a good is partly determined by its characteristics or the services it provides. The approach seeks to value the individual characteristics of that good by studying how the price people are willing to pay for it changes when the characteristics change. It is widely used to explain variations in house prices in terms of variations in environmental quality (such as air pollution, water pollution, or noise) and environmental amenities (such as attractive views or access to recreational sites). See also travel cost method.
Subjects: Environmental Science.