Shadow Pricing

In a cost-benefit analysis, the assignment of a dollar value to an intangible asset or liability that cannot be sold. Shadow pricing is arbitrary; that is, because these assets and liabilities cannot be sold, and analysts must make an educated guess on their value. An example of shadow pricing occurs in the cost-benefit analysis of building a factory. The analysis must calculate the cost of blight on the neighborhood in which the factory is built. Because there is no way to put a real value on the cost of blight, shadow pricing assigns an arbitrary value to it.

Mentioned in ?

References in periodicals archive ?

Shadow pricing : A numeraire in real, present-value terms is generally sufficient for most commercial calculations.

FINANCIAL MANAGEMENT INDICATORS TO AID DECISION MAKING (STATISTICS-CUM-EXHIBITS)

However, the application of the shadow pricing criterion will take effect starting with the fiscal year ending December 31, 2016.

GASB issues standard on valuing pool investments

It stated : "Critically, this will reduce revenue leakage based on the product's ability to do shadow pricing on negotiated preferential pricing,"

India,United Arab Emirates : NBAD deploys INDIAN SUNTEC's IT solution

There are some major issues involved in cost benefit analysis, of which the most important are valuation of costs and benefits, shadow pricing, discounting, income distribution, the treatment of uncertainty and the measurement of externalities (e.g., environmental impact study).

Estimating shadow wage rates for economic project appraisal

The team will tap into existing databases and ecological models and explore the use of economic methods such as shadow pricing, contingent valuation and choice modelling.

What price biodiversity?

It therefore follows that a financial firm that wants to maximise shareholder value cannot use the relatively straightforward capital pricing tools that are available to nonfinancial firms, and must seek an alternative shadow pricing tool to determine whether an investment adds to or detracts from shareholder value.

Building a coherent risk measurement and capital optimisation model for financial firms

3 For an intuitive discussion of shadow pricing and project evaluation, see Tower (1991).

The effects of import quotas on national welfare: comment

'Shadow pricing in distorted economies', American Economic Review, 69, 902-14.

The average and marginal domestic resource cost of foreign exchange

The concepts of social opportunity costs and of sub-optimal savings rates, for example, were central to the form of economic analysis based on shadow pricing espoused by Little and Mirrlees in their 1968 OECD volume and by their followers.

Structural Adjustment and Beyond in Sub-Saharan Africa

To the contrary, it highlights the need for creating institutional mechanisms, from formal shadow pricing to informal interoffice negotiation, that can induce greater efficiency in the use of space resources allocated outside normal market channels.

No free launch: efficient space transportation pricing

(3)For fuller analysis, including the treatment of shadow pricing and other issues beyond the scope of the present paper, see Brent 1990; Little and Mirrlees 1969, 1974; UNIDO 1973; Lal 1974.

The international competitiveness of industries in Bulgaria, Czechoslovakia, Hungary, and Poland

Any topic of further interest could be selected for in-depth study from Chapters 3 through 10, where welfare weights, competitive equilibrium, allocative and cost efficiencies, shadow pricing and a cost-benefit framework are discussed.