Existence Value
What is Existence Value?
Existence value is what people are willing to pay just to know something exists, such as a species or wilderness, even if they never use or see it.
Economists split the total value of an environmental asset into use value, which requires actually visiting, harvesting or otherwise consuming it, and non-use value, which does not. Existence value is the main piece of non-use value: people give money to protect deep ocean habitats and remote species they will never encounter, which is evidence that the willingness to pay is real. A close cousin is bequest value, the willingness to pay so that future generations still have the asset, and both differ from option value, which is payment to keep open the possibility that you yourself might use it later. Because no purchase reveals existence value, it has to be estimated from surveys rather than observed behavior.
Existence Value: a worked example
Suppose a road would cut through a remote canyon that almost nobody visits. Lost direct use benefits are small, perhaps $2 million in guiding and recreation. A survey of the country's 2 million households finds an average one time willingness to pay of $6 each to keep the canyon intact, which aggregates to 2,000,000 × $6 = $12 million. Total value protected is therefore about $14 million, not $2 million. If the road delivers $9 million in net benefits, counting existence value flips the decision from build to leave it alone.
The mistake students make with existence value
A common belief is that existence value must be zero because nobody buys or sells it, or that it is a fancy label for tourism revenue. Tourism is use value, earned from people who show up. Existence value comes from people who never will, and it appears in donations to protect places the donors will never visit. Treating it as zero is not a neutral choice, since it tilts cost benefit results toward projects that destroy the asset.
Existence Value questions
What is an example of existence value?
Paying to protect a deep sea coral reef or a rainforest you will never visit is existence value. The benefit is knowing the thing continues to exist, not any service you personally receive from it. Donations to protect distant habitats are the clearest everyday evidence that people hold this value.
What is the difference between use value and existence value?
Use value comes from actually using the resource while existence value comes from knowing it exists. A hiker's enjoyment of a park, a fishery's catch and a river's irrigation water are all use values. Existence value is held by people who will never hike, fish or irrigate there.
How do economists measure existence value?
They measure it with stated preference surveys, most often contingent valuation, because no market transaction reveals it. Revealed preference methods such as travel cost or house price studies cannot capture it, since they rely on watching people who actually use the resource. That dependence on surveys is the main reason existence value estimates are challenged.
Formula / Example
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