Measuring intrusion valuations through stated preferences and hedonic prices - a comparative study

Abstract

Intrusion effects (sometimes called encroachment effects) are a collective notion of all the external effects a road or a railway and the traffic on it, has on its surrounding, such as noise, barrier effects, visual impacts on the landscape and ecological effects. In standard cost-benefit analysis of infrastructure investments, intrusion effects are usually not included, with the possible exception of noise. Other aspects of intrusion are nearly always left outside the formal cost-benefit analysis. One of the primary reasons for this is the difficulty of obtaining reliable valuations of intrusion effects. This paper uses stated preferences (SP) and hedonic prices (HP) to obtain the valuations of intrusion effects in residential areas. In the SP survey, respondents were asked which house they would prefer to buy out of two alternatives which differed only as to proximity to a road or railway and a number of related factors such as screening and passage possibilities. The alternatives were presented with the aid of films and soundtracks. In the HP study, data on housing purchases in the Stockhom region from 1994-1997 were used to measure implicit prices on intrusion effects from roads and railways. The SP survey gave sometimes very large valuations, sometimes of the same order of magnitude as the purchase price of the house. In the HP, the intrusion effects of infrastructure proved difficult to separate from the increased accessibility. The valuations seem to differ significantly across the population, making it important to distinguish between how intrusion effects are valued by the average individual and how the intrusion effects affect market prices, which will be determined by the valuations of the marginal buyer.