the imagery. This curve shows the percent of users that would
pay various prices per scene. At a price of $0
USD
, 100 percent
of the current 1,687,600 scenes would be downloaded by US
established users, and the entire area under the demand curve
represents the net economic gain that consumers receive from
the use of Landsat imagery at the current zero price.
As can be seen in Figure 4, charging user fees creates an
economic loss to society that can be measured, and would
have the greatest impact on the potentially large number of
low-value users. The average bid amount is different if there
is a cost, and can be calculated as follows:
Average Bid Net Cost =
∫
c
h
o
i
s
g
t
hbid
[1 –
F
(
α
+
β
ln(
bid
) +
∑
K
k
=1
θ
k
d
k
)]
d
(
bid
).
(12)
We examine this loss for costs of $1,000
USD
per scene,
$100
USD
per scene, and $10
USD
per scene. The loss to
society from charging for downloading Landsat images is the
aggregate difference between the average bid amount and
average bid net of costs, and this difference per scene is ag-
gregated over scenes obtained.
Based on the same demand curve, Figure 4 graphically
illustrates the effect of increasing the price of Landsat imagery
from $0
USD
per scene to $200
USD
per scene, for example. Un-
der this scenario, the area below the demand curve and above
the price of $200
USD
represents the total consumer surplus,
or net economic gain, received by those users who continue
to purchase Landsat scenes at a price of $200
USD
per scene.
The light shaded gray area represents the loss in consumer
surplus to these same users who continue to use Landsat im-
agery but now have to pay a price of $200
USD
per scene to do
so. This loss in consumer surplus accrues to the government
as revenue, and therefore represents a transfer from imagery
users to government. The dark shaded area represents the
loss in consumer surplus that arises due to users who are not
willing to pay $200
USD
per scene exiting the market and no
longer using Landsat imagery. This represents a complete loss
in economic benefits to society as this money is not gained
by anyone. This loss is sometimes referred to in economics as
a deadweight efficiency loss. To minimize deadweight loss,
price should be set at the marginal cost of providing another
scene to a user, which in this case is nearly zero (actually 10
cents; see
).
The deadweight loss associated with charging various pric-
es for Landsat imagery can be determined by integrating the
area under the demand curve. The economic loss to society
at a price per scene of $10
USD
, $100
USD
, and $1,000
USD
is
calculated for each of the four user groups in the 2012 survey
(Table 5). Charging $10
USD
per scene for the use of Landsat
imagery results in an economic loss to society of $1.16 million
USD
per year if the analysis is restricted to US users only and
$1.45 million
USD
per year if the analysis includes both US
and international Landsat imagery users. At a price of $100
USD
per scene, this loss would increase to $46.08 million
USD
based on the effects to both US and international users, and
at a price of $1,000
USD
per scene, this loss would increase to
$439.73 million
USD
per year based on the effects to both U.S.
and international users. This deadweight loss would continue
to increase as the price per scene increases. Again, it should
be noted that this estimate is based on the assumption that
users within a particular user group are downloading an equal
proportion of scenes. If the users who drop out of the market
more quickly as the price per scene increases (i.e., they are not
willing to pay as much per scene) obtain a greater share of the
scenes than those users who stay in the market as the price in-
creases, the results in Table 5 represent a lower bound on the
annual economic loss to society associated with increasing the
price of the imagery. Alternatively, if the users who drop out
of the market more quickly as the price per scene increases
obtain a smaller share of the scenes than those users who stay
in the market as the price increases, the results in Table 5 rep-
resent an upper bound on the annual economic loss to society
associated with increasing the price of the imagery.
It is also important to note that Landsat imagery has been
available at no cost since 2008 and the losses calculated in
Table 5 are based on the number of scenes downloaded free of
charge from
EROS
in 2011 and the percentage of 2012 survey
respondents who stated that they would still be willing to
purchase a scene at various prices. Given the substantial in-
crease in the number of scenes downloaded after the imagery
became available at no cost (see Miller
et al
., 2013), charging a
positive price could result in a larger decrease in the number
of scenes downloaded than what has been estimated here.
In addition, the losses in Table 5 are based on the impacts
to direct users of the imagery only. Moving away from a free
and open data policy would likely result in greater economic
losses than those estimated here due to the fact that the analy-
sis does not account for the impact to downstream users of
Landsat imagery and imagery-derived products.
Conclusions
This paper demonstrates an approach that can in principle
be used to value a variety of non-market geospatial and other
information. The Contingent Valuation Method is applied
to provide the first aggregated estimate of economic benefits
to US and international direct users of Landsat images. Not
surprisingly, established users of Landsat tend to value the
imagery more than new/returning users, with a small portion
of these users valuing the imagery very highly. As newer users
continue to use and become more reliant on Landsat imagery,
it seems likely the value they ascribe to Landsat will increase.
The annual benefit to US users in 2011 was estimated at ap-
proximately $1.8 billion
USD
, which is two times greater than
T
able
5. E
stimated
A
nnual
E
conomic
L
oss
in
USD
to
S
ociety
from
C
harging
a
P
ositive
P
rice
for
the
U
se
of
L
andsat
I
magery
Landsat user group
Annual economic loss to society
at a price per scene of $10
Annual economic loss to society
at a price per scene of $100
Annual economic loss to society
at a price per scene of $1,000
U.S. users
Established
$565,000
$24,211,000
$288,600,000
New/returning
$593,000
$13,285,000
$73,091,000
U.S. total
$1,158,000
$37,496,000
$361,691,000
International users
Established
$119,000
$4,626,000
$52,816,000
New/returning
$168,000
$3,959,000
$25,222,000
International total
$287,000
$8,585,000
$78,038,000
GRAND TOTAL
$1,445,000
$46,081,000
$439,729,000
PHOTOGRAMMETRIC ENGINEERING & REMOTE SENSING
August 2015
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