Market-price-based monetization
Last updated
Last updated
Upright uses market-price-based monetization (also known as observed preference -based monetization) to monetize benefits for impact categories for which no commonly accepted unit of measure and monetization factor exists, such as Meaning & Joy.
Market-price-based monetization includes the following steps:
Identification of anchor products: Identify products for which the price of the product can be used as a proxy of the value the product creates within a specific impact category, and determine their average price.
Relate monetary values of anchor-products to non-anchor products: Combining (a) estimates on the relative sizes of impacts for both anchor and non-anchor products and (b) prices of anchor products, produce estimates on the monetary value of impacts of non-anchor products.
A product can qualify as an anchor product for a particular impact category, if:
It mainly creates value within that impact category
The product has negligible external benefits (at least within the impact category of interest)
Producers of the product use value-priced, rather than cost-based pricing
Examples of products that can and cannot be used as anchor products when monetizing benefits:
Category | Examples | Validity | Explanation |
---|---|---|---|
Broadly consumed goods
Literary fiction, music
Yes
The price reflects the observed preference of a large, representative sample of the general public.
Luxury goods
Gold jewelry
No
The price reflects the observed preference of a small minority. It is not representative of the general public.
Addictive substances
Alcoholic beverages
No
Physical addiction is expected to increase the demand for the product.