An assessment of HPM
Unlike the hypothetical basis of CVM, the HPM as a revealed preference approach is founded in actual consumer behaviour and is considered as credible by economists, given its close relationship with the widely acknowledged contribution of the Gorman-Lancaster theory to the analysis of demand reviewed in chapter 2 and 3. Useful explanations of the method can be found in Hanley and Spash (1993); the latter contain a review of it. However, HPM does rely heavily on the weak separability utility function of consumers and the assumption that the demand for goods embodying environment attributes are complementary, meaning that any change in environmental factor will have an impact on property values. It is also assumed that the property and land market are in equilibrium and that consumer aim to maximize utility, possessing perfect information on environment attributes determine property values, but it is likely that expected change could exert an influence.it is possible that environmental variable that are interrelated with other in their effect on property value are omitted and so lead to inaccurate estimates. The interrelationship of variable creates the statistical problem of multicollinearity. Lastly, the functional from selected will determine the shape of the demand curve and the area under it; accordingly, different functions will result in variation in estimates of the values obtained. The method does not capture non-use values, so that it is not possible to estimate TEV.