In health economics, contingent valuation is a method that elicits an individual's monetary valuations of health programmes or health states. This article reviews the theory and conduct of contingent valuation studies, with suggestions for improving the future measurement of contingent valuation for health economics applications. Contingent valuation questions can be targeted to any of the following groups: the general population, to value health insurance premiums for programmes; users of a health programme, to value the associated programme costs; or individuals with a disease, to evaluate health states. The questions can be framed to ask individuals how much they would pay to obtain positive changes in health status or avoid negative changes in health status ('willingness to pay'; WTP) or how much they would need to be paid to compensate for a decrease in health status or for foregoing an improvement in heath status ('willingness to accept'; WTA). In general WTP questions yield more accurate and precise valuations than WTA questions. Payment card techniques, with follow-up bidding using direct interviews with visual aids, are well suited for small contingent valuation studies. Several biases may be operative when assessing contingent valuation, including biases in the way participants are selected, the way in which the questions are posed, the way in which individuals interpret probabilities and value gains relative to losses, and the way in which missing or extreme responses are interpreted. An important aspect of all contingent valuation studies is an assessment of respondents' understanding of the evaluation method and the valuation task. Contingent valuation studies should measure the potential influence of biases, the validity of contingent valuation tests as measures of QOL, and the reliability and responsiveness of responses. Future research should address equity concerns associated with using contingent valuation and explore contingent valuation as a measure of utility for health states, particularly those that are minor or temporary.