Naz, Antonia Corinthia C and Mario Tuscan N. Naz. 2006. Modeling ...

3.3 Implicit Prices or Marginal Willingness-to-Pay
Choice models can be used to estimate the responsiveness of a population group
to changes in levels of particular attributes of a good or service, to marginal rates of
substitution (MRS) between attributes (trade-offs) and to obtain individual and group
estimates of the likelihood of choosing a particular good, service or activity, given the
levels of the attributes offered as the significant choice discriminators (Louviere, et. al.
2000:58). Otherwise called implicit prices, these indicate the willingness-to-pay (WTP)
for an additional unit of a non-market or non-price attribute, ceteris paribus or the
marginal WTP (MWTP).
MWTP = MRS = β NM /λY (10)
Where: β NM = coefficient of a non-market attribute
λY = coefficient of the price attribute; marginal utility of income
3.4. Potential Revenues from the Estimated User Fees
The researchers used a public valuation frame, i.e., the ECOSWAM service was
treated as a public good. The study calculated the potential revenues using the base case
(minimum compliance to RA 9003) as the reference and three alternative ECOSWAM
service scenarios or options that the Tuba Municipal government was considering to
provide to its constituents. The base case prices for the households and the business
establishments were taken from the FGDs; they do not represent the real minimum price
or the user fees that people were willing to pay for the ECOSWAM service. The focus
of the study is on the marginal revenues, i.e., how much people were willing to pay
above or on top of the base case in order to avail of higher service levels offered by the
other alternatives, and to move from one alternative to another. The researchers also
calculated the percent contribution of the user fees to the financing of the ECOSWAM
service or the cost recovery. The annual marginal revenues (MR) for each of the
alternative scenarios or options were calculated as follows:
MRH = Σ [MWTPH x XkH] x NH x 12 (months per year) (11)
MRB = Σ [MWTPB x XkB] x NB x 12 (months per year) (12)
MRT = MRH + MRB (13)
Where: N = number of households or business establishments to be covered by the ECOSWAM
service; X k = Attributes of the ECOSWAM options
subscripts: H = households; B = business establishments; T = total
The computation of the annual marginal revenues presents a “snapshot” of the
dynamic solid waste management continuum. As the population increases, the amount
of waste will increase and the revenues from the garbage user fees will also increase.
3.5. Costs of the ECOSWAM Options
The study computed for the annual maintenance and operating costs (MOC) for
the base case of the ECOSWAM service and three alternative scenarios or options. The
focus is on the marginal costs, with the base case as the reference. The capital
investment costs, e.g., development of the waste disposal site, building facilities and
purchase of equipment and vehicles shall be borne by the municipal government or a
private company, should these activities be contracted out to the latter or should there be
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