Asset management

Table of Contents

5.4 Techniques for Determining Customer Preferences

When progressing from simple community consultation methods to those involving more complex information, the use of techniques used in economic research is appropriate. The willingness‑to‑pay methodology is central to economic efficiency; it provides a link between consumer preferences and allocative efficiency. In other words, resources are allocated efficiently when they satisfy individual preferences for which there is the highest willingness to pay (Queensland Department of Transport and Main Roads (TMR) 2011). Willingness to pay is defined as the benefit individuals derive from the use of resources in satisfying their demand for goods, services and amenities. It is measured by their willingness to pay for the resources required to satisfy those demands. In the context of road assets, QDMR states that:

In the roads context the good being consumed is access. The benefits of a road improvement represent the satisfaction individuals experience from an improvement in access. If the community’s willingness to pay for a given improvement in access at least equals the opportunity costs of supplying it, then provision of that level of road access would be economically efficient (TMR 2011).

Access is not the only attribute that can be tested using this methodology; parameters such as safety, comfort, reliability and amenity can also be examined.