1. Source: Young, R.A., Determining the Economic Value of Water: Concepts and Methods, Resources for the Future Press, Washington, DC, 2005, 66. With permission.
2. Alternative cost saving (deductive): This method compares two viable alternatives addressing the same objective and assigns a bene~ t to the least costly alternative equal to the difference in their costs. Young (2005, p. 102) notes that this method applies only in the few situations, in which a less costly project of predetermined output is compared with the next likely project that could accomplish the same objective, counting as a gross bene~ t the cost of the next likely project. Veri~ cation must occur that the next likely alternative project would have been developed if the less costly project was not constructed. This evaluation method again is constructed around the knowledge of production functions for the output of interest from two alternatives. The net bene~ t is the difference in the cost of the alternatives. The production functions lead to the speci~ cation of input costs. The less costly alternative may have resulted from a new technology or other circumstances, such as a public alternative that takes advantage of economies of organizational scale or a different technology that generated its consideration. A suf~ cient study of the alternatives should demonstrate that the demand for the outcome is adequate to be addressed, especially by public funds. For groundwater projects, this analysis may be between a private development project as compared with that of public development. The objective is to produce the output at least cost. This approach may be useful in evaluating water transfers from one sector to another (such as from agriculture to municipal). Caution should be used to ensure that the alternatives are each economically practical. Exhibit 13.11 describes this method. Production level E is expected from the project alternatives regardless of which is implemented (a common objective for the alternatives). Areas a + b represent the “gross bene~ t or WTP.” The net bene~ t for producing at level E is b.
3. Source: Young, R.A., Determining the Economic Value of Water: Concepts and Methods, Resources for the Future Press, Washington, DC, 2005, 103. With permission.
4. Further note on regional benefits estimation. Hanemann (2005, pp.28-29) reviewed macroregional