distributional weights in cost benefit analysis should we forget about them many argue that it is socially inefficient to use distributional weights in cost benefit analysis and that doing so implies large inefficiency losses when distributional matters can be dealt with trough income taxation instead our results question this view by showing a large range of cases when distributional weights are second best optimal to use one example is when different provided goods affect tax revenues equally per dollar spent utility functions that are separable in the provided goods is sufficient for this most results hold for linear and non linear income taxes and whether they are optimal or not general policy implications are discussed

anomalies risk aversion economists ubiquitously employ a simple and elegant explanation for risk aversion it derives from the concavity of the utility of wealth function within the expected utility framework we show that this explanation is not plausible in most applications since anything more than economically negligible risk aversion over moderate stakes requires a utility of wealth function that is so concave that it predicts absurdly severe risk aversion over very large stakes we present examples of how the expected utility framework has misled economists and why we believe a better explanation for risk aversion must incorporate loss aversion and mental accounting

the disparity between willingness to accept and willingness to pay measures of value psychologists have long argued that people are much more averse to a loss than attracted to an equivalent gain this behavior termed loss aversion has been formalized by kahneman and tversky 1979 in their reformulation of expected utility theory prospect theory in prospect theory the utility function is replaced by a value function that evaluates changes in income from the current level increases in income are weighted by a relatively small marginal utility decreases in income are weighted by a much larger marginal utility in effect the value function implies that a kink in the relationship between utility and income occurs at the initial income or reference point and that the slope of the utility function for losses in income is steeper than it is for gains in a recent paper knetsch and sinden 1984 report a series of experiments that demonstrate the existence of a large disparity between willingness to accept wta and willingness to pay wtp measures of value they argue that the psychological theory of loss aversion explains this difference economic theory would suggest that individuals who exhibit a large disparity between wta and wtp are perhaps underperceiving the value of gains or overperceiving the value of losses are behaving in an irrational manner and will consequently achieve a lower level of well being than if they behaved in a true utility maximizing manner this would in contrast to loss aversion usually imply near equal values for wta and wtp see willig 1976 further documentation of a larger than expected disparity between wta and wtp has been obtained in surveys asking for the value of a variety of public goods for example cummings brookshire and schulze 1986 document six

reconciling sustainability and discounting in cost benefit analysis a methodological proposal abstract the incorporation of the intergenerational equity objective has rendered the traditional cost benefit analysis cba approach obsolete for the evaluation of projects presenting an important number of environmental externalities and for those whose impacts extend throughout a long period of time based on the assumption that applying a discount rate rewards current consumption and therefore that it is only possible to introduce a certain intergenerational equity in a cost benefit analysis in this work we propose an approach to discounting based on a different rationale for tangible and intangible effects we designed two indicators of environmental profitability a the intergenerational transfer amount ita which quantifies in monetary units what the current generation is willing to pass on future generations when an environmental restoration project is carried out and b the critical environmental rate cer measures the implicit environmental profitability these concepts were tested through an empirical case study pertaining to the assessment of an erosion control project in the southeast of spain the results yield traditional profitability indicators that are higher and probably closer to the real values set by the contemporary society the information provided by the environmental profitability indicators proposed renders more transparency to the quantification of the levels of intergenerational equity applied thereby facilitating the difficult reconciliation of the cba technique with the objective of sustainability

sustainability and the intergenerational distribution of natural resource entitlements abstract the paper describes an olg economy with a single exhaustible resource that has amenity value the steady states of this economy form a continuum implying path dependency we compare three policy scenarios first a zero extraction policy of enforced conservation that avoids environmental degradation possibly at the expense of intertemporal efficiency second a grandfathering policy that endows the present generations with all resources and that ensures efficiency but cannot prevent a persistent decline in lifetime utility from one generation to the next third a trust fund policy where future generations receive claims for the natural resource of the three only the trust fund ensures efficiency and protects welfare of all generations

consumer attitudes toward low stake risk in food markets consistency of quality is viewed as important for producers of consumer goods however there is no literature testing the importance of quality consistency on consumers willingness to pay for consumer goods we use an experimental auction market to investigate how inconsistency in tenderness affects consumers willingness to pay for beef we find that most consumers are risk averse with respect to sensory quality both the average tenderness and the variance of tenderness affected the consumers willingness to pay for beef reducing the uncertainty of the sensory quality by categorizing the beef into three tenderness classes increased the total value of the beef by 8

installed base and compatibility innovation product preannouncements and predation a good is often more valuable to any user the more others use compatible goods the authors show that this effect may inhibit innovation if an installed base exists and transition to a new standard must be gradual early adopters bear a disproportionate share of transient incompatibility costs this can produce excess inertia the installed base however is stranded if the new standard is adopted this may create excess momentum these dynamic effects have strategic implications temporary price cutting can permanently prevent entry and product preannouncements can be critical in innovation these strategic actions have ambiguous welfare effects

i struggled with this money business respondents perspectives on contingent valuation abstract in the long running debates about the validity and legitimacy of contingent valuation cv very little research has engaged directly with respondents during or after the survey to explore what individuals willingness to pay wtp figure meant this paper presents the results of qualitative research with respondents to a cv survey carried out as part of the appraisal of a specific nature conservation policy in the uk the results show that respondents questioned the validity of their wtp figures through discussion of the difficulties they experienced in framing a meaningful reply significant difficulties included problems in contextualising what the scheme was and how much it might be worth in both monetary and non monetary terms an inability to work out a value for one scheme in isolation from others in other parts of the uk and feelings that values for nature were not commensurable with monetary valuation turning to the legitimacy of cv participants in the research challenged claims that cv is a democratic process for ensuring that public values are incorporated in policy decisions recognizing that hard economic choices have to be made in order to achieve nature conservation goals participants argued for a decision making institution where local people could contribute to environmental policy decisions through dialogue with scientists and policy makers in the final part of the paper this project is compared with three studies that have also used qualitative approaches with respondents during and or after a cv survey the paper concludes that more context specific qualitative research with respondents is needed to explore further the conclusion that cv may not be a good methodology for capturing complex cultural values for nature and landscape

a test of the theory of reference dependent preferences eight alternative methods of eliciting preferences between money and a consumption good are identified two of these are standard willingness to accept and willingness to pay measures these methods differ with respect to the reference point used and the dimension in which responses are expressed the loss aversion hypothesis of tversky and kahneman s theory of reference dependent preferences predicts systematic differences between the preferences elicited by these methods these predictions are tested by eliciting individuals preferences for two private consumption goods the experimental design is incentive compatible and controls for income and substitution effects the theory s predictions are broadly confirmed

project evaluation with democratic decision making what does cost benefit analysis really measure abstract it is often argued that projects involving public good changes should be chosen on the basis of monetary valuation and cost benefit analysis cba however cba is not value free when used to measure welfare it is based on highly controversial value judgements when used to measure efficiency it is based on assumptions of limited relevance to democratic decision making processes cba measures total net willingness to pay neither more nor less while interesting in its own right the normative significance of this indicator is not obvious

in defense of health based standards abstract this paper explores the utilitarian ethical foundations underlying two standards for pollution control an efficiency standard and a health based standard the main point is that a health based standard can be defended quite easily on utilitarian grounds safety proponents need not be self serving irrational nor ignorant criticism of health based standards as too costly is not always persuasive since material consumption is not the only component of social welfare nor do consumption increases necessarily increase social welfare

towards a fair constructive and consistent criticism of all valuation languages comment on kallis et al 2013 we provide critical notes to the paper by kallis et al 2013 on monetary valuation we evaluate the four criteria they propose for assessing valuation studies we argue that no clear distinction is made between monetary valuation and pricing instruments the selected criteria are more relevant to assessing policy than monetary valuation the examples provided are not representative of the diversity of valuation studies encountered in the literature moreover no clear examples are provided of where valuation and associated cost benefit analysis of environmental policy go wrong we plea for a more fair constructive and consistent criticism of all valuation languages and offer relevant issues for consideration

the limits of monetization in valuing the environment a reply to gsottbauer et al we welcome the attention of gsottbauer logar and van den bergh thereinafter glv to our contribution however their critique misrepresents what our article was trying to do so it merits a response our article offered a framework for assessing the conditions under which one may or may not engage with processes that value nature in money terms glv argue that first we confuse monetary valuation methods with pricing policies and that most of what we have to say may be relevant for the latter but not for the former second they argue that the assessment criteria we propose are either obvious or unconvincing third they contend that the examples we give to illustrate the applicability of our criteria are not representative and finally they suggest that our concern with whether a particular monetary valuation study or pricing policy contributes to enclosures and neo liberalism is ideological an

attitudes to risk and attitudes to uncertainty experimental evidence in a series of experiments the interactions among individual attitudes towards risk and uncertainty the sign of the outcome domain and the way uncertainty is represented are tested this is done in a unified framework eliciting individual values by means of a second price auction results confirm the presence of the well known fourfold pattern of risk attitude risk aversion for gains and risk seeking for losses at high probability and risk seeking for gains and risk aversion for losses at low probability and show that this pattern can also be extended to uncertainty in the valuation of losses the modal pattern is decreasing risk and uncertainty aversion as the probability of loss increases while increasing risk and uncertainty aversion is observed for gains moreover it is found that the size of reaction to uncertainty does not depend on the outcome domain and that it persists in the face of an incentive compatible mechanism to elicit preferences

assessing natural resource damages using environmental annuities abstract although research methods exist to place economic values on lost wetland service flows in many circumtances the cost of conducting such research exceeds the expected value of damages in some cases sufficient time may not be available to undertake primary research in addition the existing wetland valuation research base is often inadequate to support defensible benefits transfer as an alternative to more traditional valuation techniques we propose a simplified approach based on environmental annuities the principal assumption behind this approach is that the public can be compensated for past losses in environmental services through the provision of additional services of the same type in the future an application of this approach as the basis of a recent natural resource damage claim is described

price information and bidding behavior in repeated second price auctions examining panel data on bidding behavior in over forty second price auction markets with repeated trials we observe that i posted prices influence the behavior of the median naive bidder ii posted prices do not affect the behavior of the median experienced bidder or the bidder for familiar goods and iii anticipated strategic behavior wanes after two trials the results suggest that while affiliation might exist in auctions for new goods the repeated trial design with nonprice information removes the correlation of values and provides the experience that bidders need to understand the market mechanism

common property equality and development the appeal of common property ideas may be traced in large measure to the fact that they seem to embody widely held values of equality on the other hand empirical examination of common property institutions reveals that they can coexist with significant inequality in this paper the relationship between common property and equality is examined it is argued that the role of common property can only be understood in the context of the associated private property institutions common property in agriculture is interpreted as part of a system based on small scale peasant proprietorship of arable land common property institutions provide a method of capturing scale economies and thereby increasing the efficiency of small scale proprietorship in competition with large scale production based on wage labor

compatibility and competition in airlines demand side network effects abstract network effects arising in air transport markets are usually viewed as resulting from the implications of joint production on the cost side in this paper we focus on network effects originating on the demand side we consider a network that links three cities involving two direct and one indirect connection two carriers with asymmetric traffic rights on this network compete sequentially at the first stage they choose their departure times at the second they set prices we show that in order to compensate its network disadvantage the weak carrier chooses its departure time as close as possible to its competitor s this is in contrast to the usual maximum differentiation principle the network effect intensifies price competition depending on the size of the market and on consumers valuation of waiting time various subgame perfect equilibrium configurations are exhibited

the barely revealed preference behind road investment priorities an attempt is made to reveal the preference of decision makers within the regional norwegian public roads administration the order of priority assigned to the respective competing public road investment opportunities within the various counties provinces is studied by means of a rank order multinomial logit model explanatory variables used include cost benefit and a variety of attributes characterizing the individual investment projects although statistically significant cost and benefit appear to be of only marginal importance for the priorities set more weight is attached to cost than to benefit smaller projects are preferred to larger given the benefit cost ratio in general the models estimated are able to explain only a relatively small share of the priority setting made

disaggregated economic impact analysis incorporating ecological and social trade offs and techno institutional context a case from the western ghats of india economic valuation of ecosystem benefits and their aggregation in a benefit cost analysis bca framework is the norm in mainstream environmental economics but valuation and bca have also attracted criticisms internal criticisms point to the absence of alternative scenarios in valuation overlooking of ecological trade offs and dis services and inattention to context others criticize aggregation across diverse stakeholders and the problem of non monetizable benefits and dismiss bca as fatally flawed they suggest approaches such as deliberative decision making and multi criteria analysis we propose a middle path that uses the strengths of economic analysis for decision support while avoiding the pitfalls we disaggregate economic impacts by stakeholder groups link ecosystem changes to benefits as well as dis benefits and examine how socio technological context shapes the magnitude of economic impact we illustrate this approach by studying the impact of creating the biligiri rangaswamy temple wildlife sanctuary in the western ghats forests of southern india our analysis shows that while some stakeholders are net beneficiaries others are net losers changes in forest rights irrigation technologies and ecosystem dynamics influence the magnitude of benefits and sometimes convert gainers into losers such disaggregated analysis can provide useful information for deliberative decision making and important academic insights on how economic value is generated

the assumption of equal marginal utility of income how much does it matter abstract in most applied cost benefit analyses individual willingness to pay wtp is aggregated without using explicit welfare weights this can be justified by postulating a utilitarian social welfare function along with the assumption of equal marginal utility of income for all individuals however since marginal utility is a cardinal concept there is no generally accepted way to verify the plausibility of this latter assumption nor its empirical importance in this paper we use data from seven contingent valuation studies to illustrate that if one instead assumes equal marginal utility of the public good for all individuals aggregate monetary benefit estimates change dramatically

liberalizing european airlines cost and factor productivity evidence abstract european countries do not all share the same view concerning the benefits of increased competition among airlines in europe to explain this difference in attitudes the paper presents evidence on differences in costs and global factor productivity between the main european national flag carriers the data reveal a clear distinction between the main european and north atlantic routes unit costs per passenger kilometer are lower in north atlantic routes and unit profits are higher in european routes the first result reflects the economies of scale due to higher distances and traffic density on north atlantic routes the second result is an indication of the lower level of competition between airlines in europe finally tornqvist factor productivity growth indexes 1981 1986 show that the initial gap which existed between these productivity measures at the beginning of the period is shrinking this suggests that the european airline industry is currently in a more favorable situation to support more competition

the ideology of efficiency searching for a theory of policy analysis the potential pareto improvement criterion and other measures of economic efficiency do not pass the test of consistency and coherence within economic theory nor do such measures accord with what public decision makers seek in policy advice from economists such efficiency measures are nonetheless durable components of the ideology of economics in general and benefit cost analysis in particular the objectivity of the policy scientist has been confused with the objectivity of the science while economic efficiency has no claim to objectivity the policy scientist can be an objective analyst of policy choices

toward a new welfare economics for sustainability the debate over various definitions of sustainability has for the most part been conducted within the framework of traditional welfare economics discussion has centered on technical issues imbedded within the functional forms of various optimization models especially the coefficient of the elasticity of substitution and the social discount rate two more basic problems are 1 intractable theoretical difficulties within welfare economics call into question the results of traditional models of sustainability regarding intergenerational welfare and 2 equating per capita consumption with welfare contradicts empirical evidence suggesting that the link between happiness and wealth income is relatively weak alternative approaches to measuring well being are being developed and these have great potential to move the sustainability debate forward

the sustainable residential water use sustainability efficiency and social equity the european experience abstract the present paper traces the operational conditions governing the sustainable use of water in cities towards this objective the paper first proposes a new comprehensive definition for the sustainable use of water next efficiency in use is proposed as a fundamental instrument in achieving sustainability in spite of prevailing opinions maintaining that sustainability and efficiency aim at different and probably conflicting objectives in this light several pricing modes that inhibit efficiency are examined and their effects are defined in this context egalitarian pricing which nevertheless prevents efficiency is also systematically evaluated until it is ascertained that it does not serve social equity in the use of water in the long run all the more the present paper advocates that certain egalitarian pricing systems such as the increasing block rates most prevalent at this time may have the reverse effect than the one intended and hence in the long run impose negative impacts on the welfare of low incomes as a result full cost prices are proposed as a necessary instrument for the sustainable use of water an instrument that promotes social equity in the long run the assumptions of the study are examined in a comparative analysis of representative european pricing systems and urban management modes

choices without prices without apologies valuing is usually regarded as a process of compressing information about attributes into a single metric armed with this reduced form of compact information the consumer can consider a particular object with a particular price attached or implied and make an informed decision but the process of valuing is less straightforward than we ordinarily suppose when environmental goods and services become the object of information compaction it is possible that important information is lost we comment on the choice problem germane to environmental goods and services and challenge the presumption that environmental choices made without explicit pricing are inferior to those in which hypothetical valuation studies are undertaken

toward a more complete model of individual transferable fishing quotas implications of incorporating the processing sector abstract economic analyses of individual transferable quota itq fisheries management traditionally have focused on the harvesting sector however harvester decisions impact the economic performance of co dependent processing firms this paper incorporates both sectors in an analysis of the effect of itqs on commercial fisheries results show that as a consequence of season elongation under a harvester only allocation of fishing rights capital nonmalleability implies that processor quasi rents will be redistributed to harvesters these losses could promote political gridlock and jeopardize adoption of an itq policy unless they are fully compensated or unless redistribution is avoided by a policy superior initial allocation of rights to both harvesters and processors

experimental auction procedure impact on valuation of quality differentiated goods despite increased use of experimental auctions a myriad of different procedures are being employed without formal consideration of how the procedures might affect results this study investigates the effect of several procedural issues on valuation estimates from experimental auctions results indicate the second price auction generates higher valuations than english becker degroot marschak bdm and random nth price auctions especially in latter bidding rounds and that random nth price auction yields lower valuations than english and bdm auctions we find that endowing subjects with a good prior to eliciting bids can have an impact on valuations but the effect varies across auction mechanism

the numeraire matters in cost benefit analysis abstract the choice of numeraire is shown to be important in cost benefit analysis when a public good is involved individual consumers marginal rates of substitution will generally differ thus the less valuable the numeraire is to a person the higher the number required to express his net benefit and the more will his interest weigh in the total sum the choice of money as numeraire is systemetically favourable to those who value money the least relative to alternative numeraires

the virtual aquarium commodity fiction and cod fishing abstract this article deals with the commoditization and pricing of environmental goods in particular the practice and social theory of individual transferable quotas itqs in fisheries emphasizing ethnographic material related to the management system introduced in iceland in 1984 icelandic fisheries discourse i argue is increasingly textual and hegemonic dominated by marine scientists resource economists and state officials at the same time the allocation and exchange of quotas are matters of an ongoing moral debate this debate i suggest reflects the politics of independence and equity in icelandic history as well as a deeper concern in western society with the status of money and monetary exchange a concern that has a number of parallels in other parts of the world

project analysis as input to public debate environmental valuation versus physical unit indicators abstract monetary valuation of environmental change is useful if one aims to rank alternative projects according to some specific social welfare function however if the project analysis is intended as background information to a democratic debate the advantages of monetary valuation are less obvious this paper analyzes aggregation of information taking normative disagreement explicitly into account it is demonstrated that monetary valuation is not always more informative than a physical unit measure of environmental change

entitlements missing markets and environmental uncertainty reply abstract at one level dore and ward seem intent on immunizing received doctrine they say that i did not prove that rights violated nozick s principles of justice and that i did not prove that missing markets were the problem more telling they allege i did not prove that my story was better than the particular story favored by dore and ward that is they argue that there is an alternative approach based on the theory of public economics which is indeed operational 3 they then use the bulk of their comment to explain and defend this alternative model they hope to convince the reader that the model of public economics survives intact in the face of my alternative model to the extent that their model allows one to define the problem away it is not difficult to see why they find it so compelling more seriously dore and ward fail to make a coherent argument about the concept of rights and duties and the logic of a particular rights structure that happens to prevail they seem concerned that my article was tampering with some sacred social construct the status quo rights structure and that my article threatened the received wisdom of both public economics and paretian walrasian bliss indeed theirs seems to be a genuine fear that if economists release their grip on the certitude of received orthodoxy the floodgates will be open to all manner of bumbling regulators seeking to shift rights and wealth positions across generations my article is apparently threatening because it seems to suggest that the received wisdom may at times be misleading

consistency of risk premium measures this research uses the results of a series of within sample experiments to elicit risk premium measures from agricultural producers results show that there is little consistency between measures in different contexts and using different elicitation methods suggesting that underlying risk preferences are not consistent these results highlight some of the difficulty with expected utility theory and risk measurement

technology adoption in the presence of network externalities we analyze technology adoption in industries where network externalities are significant the pattern of adoption depends on whether technologies are sponsored a sponsor is an entity that has property rights to the technology and hence is willing to make investments to promote it key findings include the following 1 compatibility tends to be undersupplied by the market but excessive standardization can occur 2 in the absence of sponsors the technology superior today has a strategic advantage and is likely to dominate the market 3 when one of two rival technologies is sponsored that technology has a strategic advantage and may be adopted even if it is inferior 4 when two competing technologies both are sponsored the technology that will be superior tomorrow has a strategic advantage

a note on pricing of hub and spoke networks abstract the difference between competitive and monopolistic pricing of airlines hub and spoke networks is examined it is found that under reasonable cost conditions pass through passengers pay lower prices per mile than those originating or ending at the hub thus higher per mile prices in large hubs do not necessarily signal market power

an experimental test for risk aversion abstract this paper evaluates an experimental method to measure attitudes to risk in individual subjects the method is applied to study the degree of risk aversion of 46 subjects the results lead us to reject a working hypothesis of risk neutrality for such experimental subjects

environmental regulations and the problem of sustainability moving beyond market failure abstract the standard metaphor of market failure is an impediment to the crafting of environmental policy that can escape policy lock in sustainability requires a policy process that can avoid this lock in sustainability concerns the creation of dynamic human processes that can respond to indeed anticipate unanticipated feedback from biological processes

effects of cheap talk on consumer willingness to pay for golden rice a large body of literature suggests willingness to pay is overstated in hypothetical valuation questions as compared to when actual payment is required recently cheap talk has been proposed to eliminate the potential bias in hypothetical valuation questions cheap talk refers to process of explaining hypothetical bias to individuals prior to asking a valuation question this study explores the effect of cheap talk in a mass mail survey using a conventional value elicitation technique results indicate that cheap talk was effective at reducing willingness to pay for most survey participants however consistent with previous research cheap talk did not reduce willingness to pay for knowledgeable consumers

altruism evolution and welfare economics henrich clearly presents the convincing evidence that the evolution of prosocial preferences altruism and altruistic punishment is both theoretically possible and empirically present in human populations henrich convinces us using only the most restrictive arguments if one goes beyond the assumptions of one gene one trait or recognizes the existence of social cognition caporael 1997 the case for the existence of prosocial behavior is overwhelming furthermore while henrich is probably correct in saying that large scale social cooperation is unique to the human species mounting evidence suggests that prosocial behavior is also present in such diverse non human species as lions meerkats fire ants and arabian babblers clutton brock 2002 so why is the reaction against the notion of pure altruism so strong in both economics and biology a likely reason is that it goes against the dominant cultural belief in progress through competition among individuals both evolutionary biology and political economy matured in victorian england where darwin s careful and cautious argument for evolution by natural selection was recast as survival of the fittest a metaphor which fit the dog eat dog world of commercial society rugged individualism is reflected in the gene based reductionism of biology as well as the agent based reductionism of welfare economics bergh and van den gowdy 2003 in his contribution henrich establishes the theoretical basis for cultural group selection based on large scale cooperation he shows that the existence of prosocial behavior cannot be explained by individual based characteristic alone such as kin selection reciprocal altruism or costly signaling this does not contradict darwinian natural selection which can operate on any statistically reliable pattern patterns of culture may vary widely in human societies based on the different kinds of cultural transmission including conformist transmission a short cut to reliable information prestige based transmission punishment of non conformists and normative conformity by which people want their behavior to match that of the group the interplay between these kinds of cultural transmission and the in

evolutionary policies for sustainable development adaptive flexibility and risk minimising abstract an evolutionary perspective on policies to foster sustainable development is presented it is argued that policies suggested by the traditional economic theory of environmental policy can stimulate unsustainable socio economic structures and patterns in addition they are unable to remove undesired locked in systems and technologies drawing on evolutionary thinking characterised by diversity selection innovation path dependence and bounded rationality an alternative partly complementary theory of environmental policy is suggested specific attention is given to the role of strategies that are aimed at increasing diversity and adaptive flexibility and at reducing risk

incommensurability and monetary valuation at the very heart of environmental cost benefit analysis cba is the claim that benefits and costs can be expressed in terms of money and hence made comparable in particular cba puts all benefits and costs on a cardinal monetary scale it assumes monetary commensurability a significant literature in ethics and political philosophy has arisen which doubts this assumption but has so far had little impact on the theory or practice of cba in light of this the paper assesses the defense of monetary commensurability offered by cost benefit analysts and the wider economics literature

measuring producers risk preferences a global risk attitude construct in applied agricultural economic research various risk attitude elicitation techniques are used here we investigate whether risk attitude measures rooted in the expected utility framework are related to measures rooted in the multi item scale framework using a second order factor analytical model and data obtained from personal computer guided interviews with 373 farmers we investigate whether the common variance among the latent risk attitude measures can be accounted for by a global risk attitude construct we find that the different risk attitude measures are related and that the global risk attitude construct is significantly related to farmers intention to use futures contracts our research suggests that farmers risk attitude is a higher order characteristic that cannot be effectively extracted by a single measure in empiricalstudies deal ing with risk risk attitudes and producers market behavior various risk attitude measures are used two major approaches to quantify directly farmers risk attitudes can be distinguished measures derived from the expected utility framework and measures derived from responses to multi item scales e g antle chavas and holt goodwin and schroeder saha shumway and talpaz smidts the purpose of this research is to test whether risk attitude measures rooted in the expected utility framework are related to the risk attitude scales rooted in the multiitem scale approach and if so whether these risk attitude measures share a common

eliciting von neumann morgenstern utilities when probabilities are distorted or unknown this paper proposes a new method the gamble tradeoff method for eliciting utilities in decision under risk or uncertainty the elicitation of utilities to be used in the expected utility criterion turns out to be possible even if probabilities are ambiguous or unknown a disadvantage of the tradeoff method is that a few more questions usually must be asked to clients also the lotteries that are needed are somewhat more complex than in the certainty equivalent method or in the probability equivalent method the major advantage of the tradeoff method is its robustness against probability distortions and misconceptions which constitute a major cause of violations of expected utility and generate inconsistencies in utility elicitation thus the tradeoff method retains full validity under prospect theory rank dependent utility and the combination of the two i e cumulative prospect theory the tradeoff method is tested for monetary outcomes and for outcomes describing life duration we find higher risk aversion for life duration but the tradeoff method elicits similar curvature of utility apparently the higher risk aversion for life duration is due to more pronounced deviations from expected utility

justifying precautionary policies incommensurability and uncertainty abstract when decisions are taken in conditions of keynesian or knightian uncertainty and when there is a threat of serious or irreversible environmental damage the precautionary principle is often recommended to guide decision making however the precautionary principle has been widely criticised in response to these criticisms a qualitative version of the precautionary principle is developed which draws its normative content from a blend of formal decision theory and political philosophy it is argued that precautionary action can be justified by some flexible combination of uncertainty and incommensurability the greater the uncertainty the less incommensurability is required to justify precautionary action and vice versa throughout the paper the arguments are explored using the example of climate change decision problems

airline mergers airport dominance and market power effects of northwestrepublic and twaozark mergers on fares at minneapolisst paul and st louis

the cold shiver of not giving enough on the social cost of recycling campaigns governments sometimes try to increase individuals contributions to public goods through appeals to consumer responsibility rather than by economic incentives for example in recycling campaigns using standard consumer theory one would hardly expect such campaigns to work at all but if consumers are motivated by norms appeals may work through changing consumers perception of the normrequirement however increasing voluntary contributions through appeals may come at a social cost the reason is that appeals work through imposing a heavier perceived responsibility on consumers this represents a welfare loss which is not necessarily outweighed by warm glow benefits

searching for sustainability the poverty of spontaneous order abstract traditional approaches to sustainability rely on models that depend upon judgments of welfare across future generations right prices and some sense as to what future persons will find giving of utility these models both accept the spontaneous order of market processes and rely on that order to derive optimal consumption paths into the future sustainability is however not a problem of divining optimal paths predicated upon right prices rather sustainability to be operational requires a prior constructed order predicated upon rights for future persons and duties for those now living who sit in a position as dictator over the settings and circumstances that will be passed on to future persons rights based approaches to sustainability do not rely upon unknowable preferences of future persons but rather upon an environmental regency in which those now living agree to preserve settings and circumstances for the future this reminds us that the issue of sustainability concerns not how much to preserve but what to preserve

hubs and high fares dominance and market power in the u s airline industry this article estimates the importance of route and airport dominance in determining the degree of market power exercised by an airline the results indicate that an airline s share of passengers on a route and at the endpoint airports significantly influences its ability to mark up price above cost the high markups of a dominant airline however do not create much of an umbrella effect from which carriers with smaller operations in the same markets can benefit the article suggests a number of possible explanations for this asymmetry

preference learning in consecutive experimental auctions this paper explores the origins of the strikingly high price premia paid for new food products in lab valuation exercises our experimental design distinguishes between two explanations of this phenomenon novelty of the experimental experience versus the novelty of the good i e preference learning bids reflect a person s desire to learn how an unfamiliar good fits into their preference set subjects bid in four consecutive experimental auctions for three goods that vary in familiarity candy bars mangos and irradiated meat our results suggest that preference learning is the main source of the high premia and that novelty of the experimental experience does not in itself artificially inflate valuations copyright 2000 oxford university press

examining risk preferences under high monetary incentives experimental evidence from the people s republic of china several experimental sessions were conducted to elicit certainty equivalents for a sequence of lotteries involving real monetary outcomes the opportunity to conduct sessions in the people s republic of china afforded the ability to offer very large monetary incentives relative to subjects living costs in the highest payoff condition subjects earned three times their normal monthly revenue in the course of a two hour experiment results indicate a statistically significant impact of the level of monetary incentives on revealed risk preferences however even under extreme monetary incentives subjects demanded amounts well in excess of expected value for low probability gain prospects copyright 1992 by american economic association

network effects congestion externalities and air traffic delays or why not all delays are evil we examine two factors that explain air traffic congestion network benefits due to hubbing and congestion externalities while both factors impact congestion we find that the hubbing effect dominates empirically hub carriers incur most of the additional travel time from hubbing primarily because they cluster their flights in short time spans to provide passengers as many potential connections as possible with a minimum of waiting time non hub flights at the same hub airports operate with minimal additional travel time these results suggest that an optimal congestion tax might have a relatively small impact on flight patterns at hub airports jel l2 l5 l9 d6

limits to cba in uk and european environmental policy retrospects and future prospects this paper reviews the contemporary debate and the now long standing role of cba in uk and european environmental policy appraisal epa and looks forward to possible future applications the position taken is that despite its limitations cba still has an important part to play in epa however with the increasingly contested nature of environmental and related public policies and outcomes its role will become less prescriptive and its findings more constrained by social justice and ethical imperatives future cba is more likely to continue to flourish as a component in a wider policy analysis and decision support system whatever decision support system is eventually adopted its value will be judged on how well it aids real policymakers operating iteratively in the non linear real world political economy

the impact of economics on environmental policy abstract environmental economists have seen their ideas translated into the rough and tumble policy world for over two decades they have witnessed the application of economic instruments to several environmental issues including preserving wetlands lowering lead levels and curbing acid rain this essay examines the impact of the rise of economics in the policy world on the making of environmental policy i focus on two related but distinct phenomena the increasing interest in the use of incentive based mechanisms such as tradable permits to achieve environmental goals and the increasing interest in the use of analytical tools such as benefit cost analysis in regulatory decision making i argue that economists and economic instruments have had a modest impact on shaping environmental health and safety regulation but that economists will play an increasingly important role in the future although the role of economics is becoming more prominent it does not follow that environmental policy will become more efficient this apparent inconsistency can be explained by the political economy of environmental policy

structured pluralism in ecological economics a reply to peter soderbaum s commentary abstract peter soderbaum argues in his commentary concerning my article on sustainability economics remig 2015 for more open and radical ecological economics i agree with that statement however i reject soderbaum s interpretation that my arguments foster mainstreamed ecological economics or dictatorship in my critique of sustainability economics i raised several issues that have remained unspecified and that potentially lead to unsustainable development patterns once put into practice soderbaum does not reply to these conceptual challenges of sustainability economics in this commentary i argue that structured pluralism dow 2004 is a constituent element of ecological economics i welcome peter soderbaum s proposal for a discussion about the definition of economics and suggest to rely on ronald coase s proposal to define economics as a science that studies the working of the economic system i conclude that sustainability economics in its current form is closer to neoclassical than ecological economics

estimating intergenerational distribution preferences resource management decisions influence not only the output of the economy but also the distribution of utility between groups within the community the theory of cost benefit analysis provides a means of incorporating distributional changes into the decision making calculus through the application of distributional or welfare weights however this practice has not been widely adopted in part due to difficulties in the estimation of distributional weights this paper addresses this problem by using the stated preference method of choice modelling to estimate distributional weights suitable for inclusion in a cost benefit analysis framework the findings of a choice modelling experiment designed to estimate community preferences with respect to intergenerational utility distribution illustrate the potential of this method in addressing distributional issues

compensating for environmental damages this paper examines a situation in which a decision maker determines the appropriate compensation that should be awarded for a given amount of ecological damage the compensation can take the form of either or both monetary and environmental units to meet three goals i minimisation of the cost associated with the compensation ii no aggregate welfare loss and iii minimal environmental compensation requirement the findings suggest that in some cases providing both monetary and environmental compensation can be the cost minimising option minimal compensation constraints can increase total compensation costs but reduce individual gains and losses relative to the initial situation that arise from heterogeneous tradeoffs between income and environmental quality

the necessity for environmental taxes for the avoidance of environmental thievery a note on the paper environmental responsibility versus taxation abstract internalizing environmental costs is a necessary condition for an effective environmental policy since the majority of socio economic activities cannot be free of environmental impacts the noninternalized external environmental costs impose a peculiar thievery of welfare charging environmental costs through environmental taxes and other economic instruments is a necessary condition for avoiding welfare thievery in this context the anti tax approaches emerging within ecological economics are found to be misleading and directing away from an effective environmental policy environmental responsibility is a different issue from the charging of the environmental costs therefore environmental taxes should not be considered as an induction to less environmental responsibility and hence to environmental degradation

bid sensitivity and the structure of the vickrey auction a research study explored a version of economist w vickrey s second price sealed bid auction used for the valuation of nonmarket goods the sensitivity of revealed values generated by this variation were examined a standard second price auction with repeated market trials was compared to a random nth price auction and a combinatorial private collection auction with sequentially revealed values results showed the consistency of revealed values in a low probability risk scenario