Comments on "Contingent Valuation: Not an Appropriate Valuation Tool" (Letters to the Editor) (Letter to the Editor‪)‬

I agree with the argument made in "Contingent Valuation: Not an Appropriate Valuation Tool" by Albert R. Wilson (Winter 2006) on the misuse of contingent valuation to value detrimental conditions in real estate. There are a few points the author touches on that could use some amplification. First, the argument can be made that willingness to pay (WTP) for X represents the lower-bound value and willingness to accept (WTA) payment to give up X represents the upper-bound value. In real estate markets, the analogy could be the intersection of the bid and offer curves, that is, what a buyer is willing to offer and what a seller is willing to sell for. In the market for public goods, these values are typically weighted against the costs (to prevent X or to preserve X) and if the total WTP exceeds the costs, the policy is implemented to affect the desired outcome. In the market for real estate, however, it is only when the bid and offer curves intersect that the sale is consummated. It is the result of the intersection of these bid and ask prices upon which hedonic price valuation is affected, i.e., the implicit value of property characteristics is estimated.