DEFINITION of 'Shadowing'

The process of creating values for variables that don't rely purely on market value. Some of these variables have a market value in the present but have indeterminable future market values due to variable conditions.

Shadowing is used as in cost-benefit analysis, which allows analysts to evaluate the future comprehensive value of a variable in any number of projected conditions.


Shadowing calculates a shadow price for the variable rather than relying solely on market price, which is how the value of economic variables tends to be measured. This hypothetical shadow price is calculated largely based on the opportunity costs and benefits of the projected scenario. By taking into account the potential costs and benefits of any given scenario, the value of the variable then reflects those circumstances in its determined worth.

  1. Cost-Benefit Analysis

    A process by which business decisions are analyzed. The benefits ...
  2. Shadow Pricing

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  3. Benefit Cost Ratio - BCR

    A ratio attempting to identify the relationship between the cost ...
  4. Opportunity Cost

    1. The cost of an alternative that must be forgone in order to ...
  5. Capital Budgeting

    The process in which a business determines whether projects such ...
  6. Future Value - FV

    The value of an asset or cash at a specified date in the future ...
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