interpreting measures of economic loss evidence from contingent valuation and experimental studies abstract from the standpoint of conventional welfare theory it is surprising that responses to contingent valuation studies of environmental goods have shown a consistent difference between willingness to pay and compensation demanded measures of economic loss this paper examines these results in light of four reasons most often given as grounds for their dismissal new experimental evidence supports an interpretation of the observed disparity in payment and compensation based measures as both real and psychologically meaningful an alternative conceptual framework suggested by prospect theory is outlined and its relevance for economic assessments of potential environmental change is discussed briefly

a review of wta wtp studies abstract willingness to accept wta is usually substantially higher than willingness to pay wtp these constructs have been studied for roughly 30 years and with a wide variety of goods this paper reviews those studies we find that the less the good is like an ordinary market good the higher is the ratio the ratio is highest for non market goods next highest for ordinary private goods and lowest for experiments involving forms of money a generalization of this pattern holds even when we account for differences in survey design ordinary goods have lower ratios than non ordinary ones we also find that ratios in real experiments are not significantly different from hypothetical experiments and that incentive compatible elicitation yields higher ratios

agents evaluations and the disparity in measures of economic loss abstract recent studies have revealed a large and unexpected disparity between willingness to pay and compensation demanded measures of economic loss further evidence of this difference is presented here together with the results of a series of survey and real money exchange experiments which indicate that when advisors evaluate entitlements on behalf of third parties the variation between the measures is far less than is shown by individuals acting on their own behalf given the wide dependence on agents a finding that they may weigh losses differently from people they act for suggests that agents choices may compromise welfare positions

resolving differences in willingness to pay and willingness to accept reply gwendolyn c morrison 1997 raises a logical point regarding our experimental test of the divergence between willingness to pay wtp and willingness to accept wta measures of economic value shogren et al 1994 she argues that our design does not provide a true test of the existence of a fundamental endowment effect since we did not control for the potential of a pivoting indifference map daniel kahneman et al 1990 she concludes that even though our ev idence shows that the mean wtp and wta bids for market goods with close substitutes e g candy bars and coffee mugs converge after market experience the endowment effect might still be alive and well albeit at statisti cally insignificant levels

statistical efficiency of double bounded dichotomous choice contingent valuation the statistical efficiency of conventional dichotomous choice contingent valuation surveys can be improved by asking each respondent a second dichotomous choice question which depends on the response to the first question if the first response is yes the second bid is some amount greater than the first bid while if the first response is no the second bid is some amount smaller this double bounded approach is shown to be asymptotically more efficient than the conventional singlebounded approach using data from a survey of californians regarding their willingness to pay for wetlands in the san joaquin valley we show that in a finite sample the gain in efficiency can be very substantial

winners losers and the nuclear waste dilemma this paper explores how property right assignment affects social efficiency when a public program has both public good and public bad components we show that when willingness to accept a public bad exceeds the willingness to pay the net benefit is unambiguously lower when the property right supports the status quo institutional structure thus kaldor hicks efficiency tests tend to favor public programs and mitigation over the status quo even when mitigation negatively affects another group to illustrate the result we develop social cost estimates for moving nuclear waste from current temporary storage facilities to a permanent central repository at yucca mountain nv usa for a representative city with a population of 226 195 the present value of the external cost of shipping waste is 1 42 billion when those living near temporary nuclear waste storage facilities are assigned the property right to health and safety that number swells to 5 95 billion when those living near the transport route are assigned the property right thus property right assignment affects the efficient level of nuclear waste and thus nuclear energy produced

electricity outages in ghana are contingent valuation estimates valid african countries experience persistent and serious energy outages but while multiple valuation studies provide estimates of the costs of electricity outages in high income countries evidence is scarce for lower and middle income countries the few studies that assess the value of reliable energy supply rely on the contingent valuation method that is under wide scrutiny this paper aims to provide new estimates of households willingness to pay to reduce electricity outages for ghana and contributes to the debate on the validity of contingent valuation results for energy reliability our results suggest that households are willing to pay ghs 67 17 per month for reliable electricity supply equivalent to 7 of respondents income the results of tests for hypothetical bias wtp wta disparity and income effects suggest that the contingent valuation estimates from this study are robust and can support decision makers in prioritizing energy policies and investments

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

loss aversion and individual characteristics many studies have shown that loss aversion affects the valuation of non market goods using stated choice data this paper presents an empirical investigation of how individual level loss aversion varies with observable personal characteristics and with the choice context we investigate loss aversion with respect to travel time and money and find significant loss aversion in both dimensions the degree of loss aversion in the time dimension is larger than in the money dimension and depends on age and education subjects tend to be more loss averse when the reference is well established

loss aversion without the endowment effect and other explanations for the wta wtp disparity abstract to learn why wta regularly exceeds wtp in economic experiments involving inexpensive market goods with ample substitutes the verbal protocol technique was used in a real cash experiment employing a random price auction results suggest that the primary reason for the disparity was subjects reluctance to suffer a net loss from any transaction whether purchase or sale and tendency to consider sale much below assumed market price as a loss this interpretation indicates a kind of loss aversion but not the kind envisioned in the endowment effect which maintains that selling creates a loss and buying creates a gain

value learning and the willingness to accept willingness to pay disparity the assumption that individual preferences are rational and consistent with standard economic theory is often appropriate but may be optimistic if consumers are uncertain about either their preferences or how the market operates both sources of uncertainty may present themselves in lab experiments exploring the well known disparity between individuals willingness to accept and willingness to pay this paper explores the role of value uncertainty in the observed disparity and finds that providing subjects with a value learning opportunity can reduce the value disparity to insignificance

lagged beliefs and reference dependent utility abstract models of expectation based reference dependent preferences proposes that the reference point to which consumption outcomes are compared is endogenously determined as a function of lagged probabilistic beliefs this paper presents an experiment designed to test some predictions of expectation based reference dependence models the design induces a stochastic reference point via a lottery and then measures valuations for a commodity the experimental results find no effect of the first stage lottery on commodity valuation

overestimating others willingness to pay this article documents a widespread bias a tendency to overestimate how much others will pay for goods the effect may influence pricing and negotiations which depend on accurate assessments of others valuations it is also shown to underlie or interact with several widely researched behavioral phenomena including egocentric empathy gaps the endowment effect and the false consensus effect

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

from production based to consumption based national emission inventories abstract under the united national framework convention of climate change unfccc countries are required to submit national emission inventories nei to benchmark reductions in greenhouse gas ghg emissions depending on the definition and system boundary of the nei the mitigation options and priorities may vary the territorial system boundary used by the unfccc has been critiqued for not including international transportation and potentially causing carbon leakage to address these issues past literature has argued in favour of using consumption based nei in climate policy this article discusses several issues in moving from the standard production based nei to consumption based nei first two distinct accounting approaches for constructing consumption based nei are presented the approaches differ in the allocation of intermediate consumption of imported products second a consistent method of weighting production based and consumption based nei is discussed this is an extension of the previous literature on shared responsibility to nei third due to increased uncertainty and a wide system boundary it may be difficult to implement consumption based nei directly into climate policy several alternative options for incorporating consumption based inventories into climate policy are discussed

valuing environmental commodities some recent experiments a general model of consumer behavior is proposed to assess six recent experiments that have attempted to reveal preferences for environmental goals each experiment used a mix of both the techniques and the theory of demand for non market commodities and each was designed to estimate a non market attitude associated with the environment and to analyze potential biases in the techniques the six cases show some consistency in results the linkage within the contingent market between the environmental attribute institutional setting and the bidding instrument must be realistic and accepted by the respondent to avoid biased results possibly the most important result is the replication of results using a traditional property value study and a contingent bidding approach all evidence obtained to date suggests that hedonic studies of property values or wages travel costs and survey techniques all yield values well one order of magnitude in accuracy 41 references 2 tables

preserving waterfowl habitat on the canadian prairies economic incentives versus moral suasion this paper examines a pilot project of nawmp that encourages farmers to promote or maintain waterfowl habitat by relying not only on economic incentives but on awareness education and moral suasion the pilot project relies on farmers attitudes to keep payments low because project payments substitute for grain program subsidies thus constituting a transfer from canadian taxpayers to u s contributors to nawmp a survey instrument and regression analysis are used to examine attitudes economic incentives and willingness to pay and willingness to accept compensation for modifying land use in order to conserve waterfowl habitat the results indicate that current economic incentives offered to agricultural producers are inadequate because they ignore nonmarket costs and that a positive attitude toward habitat preservation cannot be used as a substitute for monetary incentives

challenges and prospects of valuation cruise ship pollution case negative externalities and natural resource valuations play an important role in the debate and analysis of sustainable development however as yet they have not been included extensively in tourism research or planning as a result limited progress has been made to improve environmental management and address resource management challenges this paper seeks to stimulate the discussion over the advantages disadvantages failures and successes of selected economic and development discourses valuation methodologies are discussed and placed within a pollution valuation impact model to identify opportunities to assess the impact of pollution and the value of natural capital in the tourism context cruise tourism is used to demonstrate the model due to its rapid growth and the potential for intense pollution outputs it is considered in the context of a developing and transition state one which sees tourism as a panacea to the problem of accessing international currency by employing cross disciplinary research and applying valuation logic the paper aims to contribute to the decision making process in tourism

nudging the poor and the rich a field study on the distributional effects of green electricity defaults abstract choice defaults are an increasingly popular public policy tool yet there is little knowledge of the distributional consequences of such nudges for different groups in society we report results from an elicitation study in the residential electricity market in switzerland in which we contrast consumers actual contract choices under an existing default regime with the same consumers active choices in a survey presenting the same choice set without any default we find that the default is successful at curbing greenhouse gas emissions but it leads poorer households to pay more for their electricity consumption than they would want to while leaving a significant willingness to pay for green electricity by richer households untapped

substitution effects in the valuation of multiple environmental programs abstract a theoretical framework for understanding substitution and complementary effects between environmental programs is derived a multiple program valuation function is specified and its structure analyzed a maximum likelihood estimator is derived to estimate the parameters of the valuation function using referendum type contingent valuation data the empirical analysis shows that the conventional benefit aggregation approach of independent valuation and summation overstates the benefits of two and three program policies by an average of 24 and 54 respectively

experiments on the difference between willingness to pay and willingness to accept comment reply willingness to pay wtp and willingness to accept wta measures of welfare change have been found to differ substantially when elicited from surveys or experimental market transactions conventional economic theory suggests that the difference between wtp and wta should be smaller than those observed in empirical tests this study focuses on the hypothesis that the availability of substitutes for the good being evaluated affects the difference between the two measures the results suggest that the existence of a substitute does reduce the difference between wtp and wta however the difference between these two measures is significant with or without substitutes

contingent valuation a practical alternative when prices aren t available a person may be willing to make an economic tradeoff to assure that a wilderness area or scenic resource is protected even if neither that person nor perhaps anyone else will actually visit this area this tradeoff is commonly labeled passive use value contingent valuation studies ask questions that help to reveal the monetary tradeoff each person would make concerning the value of goods or services such surveys are a practical alternative approach for eliciting the value of public goods including those with passive use considerations first i discuss the exxon valdez oil spill of march 1989 focusing on why it is important to measure monetary tradeoffs for goods where passive use considerations loom large although discussions of contingent valuation often focus on whether the method is sufficiently reliable for use in assessing natural resource damages in lawsuits it is important to remember that most estimates from contingent valuation studies are used in benefit cost assessments not natural resource damage assessments those working on benefit cost analysis have long recognized that goods and impacts that cannot be quantified are valued implicitly by giving them a limitless value when government regulations preclude certain activities or giving them a value of zero by leaving certain consequences out of the analysis contingent valuation offers a practical alternative for reducing the use of either of these extreme choices i put forward an affirmative case for contingent valuation and address a number of the concerns that have arisen

how reliable are meta analyses for international benefit transfers meta analysis has increasingly been used to synthesise the environmental valuation literature but only a few test the use of these analyses for benefit transfer these are typically based on national studies only however meta analyses of valuation studies across countries are a potentially powerful tool for benefit transfer especially for environmental goods where the domestic literature is scarce we test the reliability of such international meta analytic transfers and find that even under conditions of homogeneity in valuation methods cultural and institutional conditions across countries and a meta analysis with large explanatory power the transfer errors could still be large further international meta analytic transfers do not on average perform better than simple value transfers averaging over domestic studies thus we question whether the use of meta analysis for practical benefit transfer achieves reliability gains justifying the increased effort however more meta analytic benefit transfer tests should be performed for other environmental goods and other countries before discarding international meta analysis as a tool for benefit transfer

environmental damage evaluation in a willingness to accept scenario a latent class approach based on familiarity in this paper we report on the results of the application of a latent class model that was designed to identify and characterize unobserved preference heterogeneity in the context of a willingness to accept wta framework involving negative environmental externalities stemming from the expansion of the port of valencia we investigated the hypothesis that respondents with greater familiarity with the targeted good and any related environmental damage would demand more compensation that is they would have a significantly higher wta based on respondents familiarity with the port of valencia and their pre existing knowledge about the negative consequences of its potential expansion three clusters based on six indicators are identified results show that contrary to what might be expected familiarity with a public good does not in all cases have a significant effect on stated wta

an endowment effect for risk experimental tests of stochastic reference points recent models of reference dependent preferences indicate that expectations may play a prominent role in the presence of behavioral anomalies a subset of such expectations based models predicts an endowment effect for risk that risk attitudes differ when reference points change from certain to stochastic in two purposefully simple risk preference experiments eliminating often discussed confounds i demonstrate both between and within subjects such an endowment effect for risk these results provide needed separation between expectations based reference dependent models allow for evaluation of recent theoretical extensions and may help to close a long standing debate in decision science on inconsistency between utility elicitation methodologies

residential willingness to pay for deep decarbonization of electricity supply contingent valuation evidence from hong kong abstract motivated by the government s proposed target of reducing co2 emissions by 30 of the 2005 level in the year 2020 we estimate the residential willingness to pay wtp for deep decarbonization of hong kong s electricity supply which is heavily dependent on coal fired generation our contingent valuation survey conducted in 2016 of 1460 households yields dichotomous choice data based on the respondents answers to a series of closed ended questions such data are less susceptible to the strategic bias that often plagues self stated wtp data obtained by direct elicitation via open ended questions using binary choice models we find that average wtp is 48 51 relative to current bills if the decarbonization target is achieved via natural gas generation and renewable energy however estimated wtp declines to 32 42 when decarbonization entails additional nuclear imports from china as the projected bill increase caused by the target s implementation is 40 our wtp estimates support the government s fuel mix policy of using natural gas and renewable energy to displace hong kong s coal generation

an investigation of the rationality of consumer valuations of multiple health risks after developing a conceptual analysis of consumer valuation of multiple risks we explore both economic and cognitive hypotheses regarding individual risk taking using a sample of over 1 500 consumers our study ascertains risk dollar tradeoffs for the risks associated with using an insecticide and a toilet bowl cleaner we observe the expected positive valuation of risk reductions and find empirical support for a diminishing in the valuation of risk reduction as the extent of the risk reduction increases we also find evidence of certainty premiums for the total elimination of one risk but no strong evidence of additional certainty premiums for the elimination of multiple risks strong reference risk effects are evident as increases in risk were valued much more greatly than were decreases

monetary valuation of the social cost of co2 emissions a critical survey an expanding branch of research has estimated the potential costs of climate change which are often expressed as the social cost of carbon scc or the costs of an additional ton of co2 emissions estimates of the scc can be used by policy makers to evaluate climate change policies and greenhouse gas emission reduction projects by means of cost benefit analyses cbas such analyses are complicated by the wide range of scc values that have been reported in the literature and the large uncertainties involved in estimating the potential economic impacts and related costs of climate change this study presents a critical review of the reported scc estimates by examining some neglected consequences of climate change uncertain and extreme scenarios of climate change the discounting of future climate change effects the treatment of individual risk aversion and assumptions about social welfare in view of the many uncertainties and omissions in conventional cost benefit analyses of climate impacts and the scc alternative approaches to decision making should be considered for climate policy

consumer rationality and the status quo received microeconomic theory presumes rational consumers maximize utility over all commodity bundles recent analysis however suggests that a consumer s status quo may limit economic rationality bias consumer decisions and induce serious errors in survey based valuations of public and private goods using regression and choice theoretic frameworks we investigate the existence of status quo effects in the consumer valuation of a particular unpriced product the reliability of residential electrical service such valuations have become important in electric utility resource planning and rate making we find substantial status quo effects which must be addressed in welfare comparisons regarding electric service reliability

behavioral environmental economics promises and challenges environmental issues provide a rich ground for identifying the existence and consequences of human limitations in this paper we present a growing literature lying at the interface between behavioral and environmental economics this literature identifies alternative solutions to traditional economic instruments in environmental domains that often work imperfectly but it also faces a set of challenges including the difficulty of computing welfare effects and the identification of a robust environmental policy based on context dependent socio psychological effects we illustrate our critical discussion with two behavioral schemes that have been widely implemented green nudges and corporate environmental responsibility

frames of mind in intertemporal choice recent research has demonstrated that choices between gambles are systematically influenced by the way they are expressed kahneman and tversky s prospect theory kahneman d a tversky 1979 prospect theory an analysis of decision under risk econometrica472 363 391 explains many of these framing effects as shifts in the point of reference from which prospects are evaluated this paper demonstrates the applicability of the reference point concept to intertemporal choice three experiments demonstrate that when people choose between immediate and delayed consumption the reference point used to evaluate alternatives can significantly influence choice the first study elicited relative preference for immediate and delayed consumption using three methods each of which differently framed choices between alternatives offering identical end state consumption the conventional discounted utility model predicts that the three methods of elicitation should yield similar estimates of time preference but preferences were found to differ in accordance with a reference point model the second and third studies extend and replicate the results from the first the third using real rather than hypothetical choices

decision making over time and under uncertainty a common approach this paper considers a number of parallels between risky and intertemporal choice we begin by demonstrating a one to one correspondence between the behavioral violations of the respective normative theories for the two domains i e expected utility and discounted utility models we argue that such violations or preference reversals are broadly consistent with three propositions about the weight that an attribute receives in both types of multiattribute choice specifically it appears that 1 if we add a constant to all values of an attribute then that attribute becomes less important 2 if we proportionately increase all values of an attribute or if we change the sign of an attribute from positive to negative then that attribute becomes more important the generality of these propositions as well as the constraints they would impose on separable representations of multiattribute preferences is discussed

valuing the futures market clearinghouse s default exposure during the 1987 crash futures market clearinghouses are intermediaries that make large volume trading between anonymous parties feasible during the market crash in october 1987 rumors spread that a clearinghouse might fail this paper presents estimates of three measures of the default exposure the authors estimate the traditional summary statistic for risk exposure the tail probabilities they also estimate two economic measures the expected value of the payoffs in the tails and expected value of the payoffs in the tails conditional on landing in the tail the authors estimates indicate the market thought another crash was unlikely but that if one occurred it would be large

money is no object testing the endowment effect in exchange goods abstract we present a new experimental design to test whether the endowment effect exists for exchange goods like money we compare three groups to a baseline one endowed with money one endowed with chocolate coins and one endowed with chocolate coins described as tokens we find an endowment effect for chocolate coins but no endowment effect for money or for chocolate coins when they are described as tokens the results suggest that the endowment effect does not exist for exchange goods

what do income tests tell us about the gap between wta and wtp for public goods abstract theory relates the gap between wta willingness to accept compensation and wtp willingness to pay to the income elasticity of wtp it has been suggested that empirical estimates of the income elasticity of wtp can therefore be used to test whether an observed gap between wta and wtp is consistent with rational behavior we examine this issue for the case of non market public goods we identify the theoretically appropriate tests of income sensitivity and examine conditions for valid income sensitivity tests we show that income tests may provide false signals in common settings indicating an inconsistency where none exists

tests of market outcomes with asymmetric valuations of gains and losses smaller gains fewer trades and less value abstract the pervasive finding that individuals value losses more than gains suggests that actual gains from trade and numbers of market exchanges may well be much smaller than would be the case if people s buying and selling prices were equivalent as normally assumed the results of two sets of costless market simulations using actual gain and loss valuations show that the actual gains from exchange and trade volumes are less than half of those expected with conventional assumptions and that completion of all pareto efficient exchanges fail by wide margins to shift entitlements to those willing to pay the most for them these findings suggest the valuation disparity has significant welfare implications and may be a major cause of market stickiness

how do landowners price their lands during land expropriation and the motives behind it an explanation from a wta wtp experiment in central beijing compensation paid to property owners for land expropriation is always a controversial topic partly due to the difficulty in revealing households true valuation of their housing this paper estimates and discusses the widely observed willingness to accept willingness to pay wta wtp gap for surveyed residents of their own houses during land expropriation by testing several hypotheses interpreting the wta wtp disparity from previous studies the paper tries to establish the incentive for households decision making the paper employs a contingent valuation method with data from 315 household interviews in central beijing china the paper reports an average wta wtp ratio of 3 74 and reaches the conclusion that in our case the high compensation required by property owners largely derives from opportunistic pricing behaviour rather than sentimental attachment to the dwellings that is unobservable in the market price and that the wta of the residents is intentionally overpriced

consumer and producer environmental responsibility comparing two approaches abstract two different indicators of environmental responsibility were independently proposed by rodrigues et al rodrigues j domingos t giljum s schneider f 2006 designing an indicator of environmental responsibility ecological economics 59 3 256 266 and lenzen et al lenzen m murray j sack f wiedmann t 2007 shared producer and consumer responsibility theory and practice ecological economics 61 27 42 these indicators are both supposed to reflect the indirect effects of consumer and producer behavior in the generation of environmental pressure in this paper we compare their mathematical properties and interpretation we conclude that they have different implications for environmental policy

elicitation formats and the wta wtp gap a study of climate neutral foods we conduct a field valuation experiment where we vary the valuation method contingent valuation vs inferred valuation as well as the payment format dichotomous choice vs payment card willingness to accept and willingness to pay valuations are elicited in a within subjects design for foods with climate neutral labels we find a similar gap for valuations elicited with the contingent or the inferred valuation method however we also find that the gap can be muted by using a payment card elicitation format

contingent valuation controversies and evidence contingent valuation cv has become one of the most widely used non market valuation techniques cv s prominence is due to its flexibility and ability to estimate total value including passive use value its use and the inclusion of passive use value in benefit cost analyses and environ mental litigation are the subject of a contentious debate this paper discusses key areas of the debate over cv and the validity of passive use value we conclude that many of the alleged problems with cv can be resolved by careful study design and implementation we further conclude that claims that empirical cv findings are theoretically inconsistent are not generally supported by the literature the debate over cv however has clarified several key issues related to nonmarket valuation and can provide useful guidance both to cv practitioners and the users of cv results

a framework for evaluating wtp for bipv in residential housing design in developing countries a case study of north cyprus this paper explores people s preferences for a built in photovoltaic bipv renewable energy system to be integrated into housing construction a novel methodology was developed to study the case of northern cyprus for better understanding of possibilities that abound in bipv integration the methodology incorporates building information modeling bim as a real time design and economic assessment tool for bipv choices this serves to benefit both the construction companies and potential house owners in their decision making in addition it uses a contingent valuation cv method to assess the willingness to pay wtp and the willingness to accept wta compensation the results indicate that the capital cost of pv is not instrumental in choice and a lower feed in tariff could be acceptable

experimental tests of the endowment effect abstract the endowment effect which predicts undertrading and a willingness to accept greater than willingness to pay is studied using responses that remove all reference to buying or selling and focuses only on choice tasks the results significantly lower the willingness to pay willingness to accept discrepancy but the latter is still significant a high efficiency open display uniform price auction is used to exchange mugs for money since mugs are randomly assigned to half of 2n subjects n 2 mugs are predicted to trade less than n 2 mugs trade on average but more than previously reported the phenomenon exists but is less prominent than reported previously

willingness to pay and willingness to accept how much can they differ comment i agree with the point made by edoh y amiran and daniel a hagen 2003 that there can be a substantial or even infinite divergence between the wta and wtp for a public good even where there is a nonzero elasticity of substitution between market goods and the public good provided that the indifference curves are asymptotically bounded with respect to market goods in the manner they describe this is an important point they are also correct to point out that the elasticity of substitution is a local concept whereas their asymptotic boundedness condition applies also for discrete changes my 1991 paper used a local analysis because it was following the structure of the analysis in robert d willig 1976 and alan randall and john r stoll 1980 i wanted to show that while randall and stoll appeared to extend willig s local result on wta versus wtp from price changes to changes in the quantity of a public good the relevant elasticity was in fact different and involved the substitution elasticity as well as the income elasticity i view these points by amiran and hagen as not two separate results but essentially the same result their asymptotic boundedness condition generalizes my zero elasticity of substitution condition to discrete changes the asymptotic boundedness condition can be expressed as follows assuming a bivariate utility function u x q and given a reference point x q associated with a reference utility level u u x q there exists some q q such that for all q q there exists no x such that u x q u in other words no amount of x can substitute for the reduction in public good from q to q q in the case of a zero elasticity of substitution q q but as amiran and hagen show in their theorem 1 this is unnecessarily restrictive when dealing with a discrete reduction in q furthermore their theorem 2 can be viewed as a special case of their theorem 1 in which q 0 which makes q an essential commodity it is well known in consumer theory that the wta to avoid the loss of an essential market good is infinite their theorem 2 extends this result to the case of an essential nonmarket good but as their theorem 1 shows essentialness is not necessary for an infinite wta the boundedness condition is the key and this implies a fundamental lack of substitutability between money market goods and the public good

understanding how income influences willingness to pay for joint programs a more equitable value measure for the less wealthy the preponderance of evidence from many studies is that less wealthy households are subjected to greater exposure per capita and in aggregate to air pollution water pollution and toxic wastes it also is the case that the less wealthy are provided with a disproportionately low amount of other programs to enhance amenities provided by the natural environment such as recreational resources and high quality esthetic opportunities both quality and quantity however to date no study has quantified the scale of this effect on the less wealthy as compared to their more wealthy counterparts when it comes to policy choices made on the basis of benefits analysis this study provides a new equity adjustment method to measure quantitatively the effect of this inequity in the case of public goods

biased valuations damage assessments and policy choices the choice of measure matters abstract damages from for example an oil spill can be measured by how much people are willing to pay to avoid them or by the minimum compensation they demand to accept them and decisions to clean up can be justified by the willingness to pay to do it or by the compensation necessary to forgo it contrary to the usual official and unofficial conventions that the choice of measure is of no matter the empirical evidence and intuitions of most people strongly suggest otherwise the appropriate choice of measure appears to turn not on legal entitlements but on the reference state people use to judge negative and positive changes a criteria that is likely to call into question most estimates of the damages of increased health risks and the value of environmental mitigation efforts

discount rates inferred from decisions an experimental study two hundred and four students of economics and finance participated in an intertemporal choice experiment which manipulated three dimensions in a 4 4 4 factorial design scenario postponing a receipt postponing a payment expediting a receipt expediting a payment time delay 0 5 1 2 and 4 years and size of cashflow 40 200 1000 and 5000 individual discount rates were inferred from the responses and then used to test competitively four hypotheses regarding the behavior of discount rates the classical hypothesis asserting that the discount rate is uniform across scenarios time delays and sums of cashflow was flatly rejected a market segmentation approach was found lacking the results support an implicit risk hypothesis according to which delayed consequences are associated with an implicit risk value and an added compensation hypothesis which asserts that individuals require compensation for a change in their financial position

the economic effects of climate change greenhouse gas emissions are fundamental both to the world s energy system and to its food production the production of co2 the predominant gas implicated in climate change is intrinsic to fossil fuel combustion specifically thermal energy is generated by breaking the chemical bonds in the carbohydrates oil coal and natural gas and oxidizing the components to co2 and h2o one cannot have cheap energy without carbon dioxide emissions similarly methane ch4 emissions an important greenhouse gas in its own right are necessary to prevent the build up of hydrogen in anaerobic digestion and decomposition one cannot have beef mutton dairy or rice without methane emissions climate change is the mother of all externalities larger more complex and more uncertain than any other environmental problem the sources of greenhouse gas emissions are more diffuse than any other environmental problem every company every farm every household emits some greenhouse gases the effects are similarly pervasive weather affects agriculture energy use health and many aspects of nature which in turn affects everything and everyone the causes and consequences of climate change are very diverse and those in low income countries who contribute least to climate change are most vulnerable to its effects climate change is also a long term problem some greenhouse gases have an atmospheric life time measured in tens of thousands of years the quantities of emissions involved are enormous in 2000 carbon dioxide emissions alone and excluding land use change were 24 billion metric tons of carbon dioxide tco2

consumer s surplus without apology the purpose of this paper is to settle the controversy surrounding consumer s surplus and by so doing to validate its use as a tool of welfare economics i will show that observed consumer s surplus can be rigorously utilized to estimate the unobservable compensating and equivalent variations the correct theoretical measures of the welfare impact of changes in prices and income on an individual i derive precise upper and lower bounds on the percentage errors of approximating the compensating and equivalent variations with consumer s surplus these bounds can be explicitly calculated from observable demand data and it is clear that in most applications the error of approximation will be very small in fact the error will often be overshadowed by the errors involved in estimating the demand curve the results in no way depend upon arguments about the constancy of the marginal utility of income consequently this paper supplies specific empirical criteria which can replace the apologetic caveats frequently employed by those who presently apply consumer s surplus moreover the results imply that consumer s surplus is usually a very good approximation to the appropriate welfare measures to preview below i establish the validity of these rules of thumb for a

auctions experiments and contingent valuation laboratory experiments are a welcome development that promise to make a significant contribution to the study of economic behavior heiner 1985 plott 1982 smith 1982 1985 while relatively new to economics controlled laboratory studies of human behavior have long constituted the core of experimental psychology where there is a wealth of methodological experience from which experimental economists might profitably draw in particular current attempts to apply laboratory auction methods to valuing nonmarket environmental goods would be improved by more rigorous experimental design and data analysis procedures

willingness to pay and willingness to accept some evidence of an endowment effect the source of the disparity between willingness to pay wtp and willingness to accept wta measures of value has been the subject of recent debate in the literature this paper presents the results of a pilot experiment designed to test whether contrary to the findings of shogren et al 1994 the endowment effect might be a significant source of the wtp wta divergence the results are a direct contradiction of what the substitutability argument would predict and thus indicate that the endowment effect cannot yet be dismissed as a possible driving force behind the disparity

auction fever rising revenue in second price auction formats the prevalent term auction fever visualizes that ascending auctions inconsistent with theory are likely to provoke higher bids than one shot auctions to explore and isolate causes of auction fever experimentally we design four different strategy proof auction formats and order these according to expected rising bids based on pseudo endowment effect arguments psychological ownership and disparity between willingness to pay and willingness to accept observed revenues in the experiment in the four formats rank as expected if bidders have private uncertain values the private information of a bidder is the distribution of her value a control treatment supports our view that the traditional private certain values approach prevents auction fever in the laboratory another control treatment with a procurement auction relates the auction fever bids to bids in a one shot auction with real endowments we conclude that when bidders are uncertain about their valuations auctions that foster pseudo endowment may raise bids and revenues

the disparity between willingness to pay and compensation demanded another look at laboratory evidence abstract the existence of a disparity between willingness to pay and compensation demanded is tested in three controlled experiments the results indicate a modest initial disparity which is reduced in a learning environment

reducing gain loss asymmetry a virtual reality choice experiment valuing land use change abstract in the majority of choice experiments ces the attributes of non market goods are conveyed to respondents as a table of numeric and or categorical data recent research suggests that respondents may have difficulties evaluating data in this format in the context of a ce eliciting preferences for changes in coastal land use this study uses a split sample experiment to compare standard presentations with virtual reality vr visualisations conveying objectively identical information we find that compared to the standard presentation preferences elicited in vr treatments are less variable and exhibit a significant reduction in asymmetry between willingness to pay wtp for gains and willingness to accept wta for corresponding losses we conjecture that the greater evaluability of the vr presentation reduces respondent judgement error and moderates reliance on the loss aversion heuristic

theoretical incentive properties of contingent valuation questions do they matter in the field abstract green et al 1998 green d jacowitz k e kahneman d mcfadden d 1998 referendum contigent valuation anchoring and willingness to pay for public goods resource and energy economics 20 2 85 116 show theoretically that stated preference questions about public services can be framed in such ways that if the subjects accept the frame the payoff maximizing behavior will be to answer truthfully one key element of such a theoretically incentive compatible framing is that the hypothetical decision rule specified in the survey instrument is understood to be a majority rule rather than the efficiency rule typically used in cost benefit analysis we conducted field experiments in germany and switzerland to test if a referendum framing as suggested by green et al is effective in reducing strategic misrepresentation in a contingent valuation setting we did not find the expected effects of the framing treatments on stated willingness to pay or on individuals stated beliefs about the social choice context the results do not support hopes that a theoretically incentive compatible framing could be purposefully used to invoke the specific beliefs about the linkage between responses and policy implementation that would make stated preference questions incentive compatible

fuzzy logic and preference uncertainty in non market valuation in seeking to value environmental amenities and public goods individuals often have trouble trading off the vague good or amenity against a monetary measure valuation in these circumstances can best be described as fuzzy in terms of the amenity being valued perceptions of property rights and the numbers chosen to reflect values in this paper we apply fuzzy logic to contingent valuation employing a fuzzy clustering approach for incorporating preference uncertainty obtained from a follow up certainty confidence question we develop a fuzzy random utility maximization frum framework where the perceived utility of each individual is fuzzy in the sense that an individual s utility belongs to each cluster to some degree the model is then applied to a swedish survey that elicited residents willingness to pay for enhanced forest conservation and to a canadian survey of agricultural landowners that elicited their willingness to accept compensation for a tree planting program both the wtp and wta measures we obtain using the fuzzy approach are well below those obtained using standard probability methods based on goodness of fit measures and monte carlo experimentation a case can be made for using a fuzzy preference approach for modeling preference uncertainty as opposed to incorporating respondent uncertainty within the random utility maximization framework

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

more laboratory evidence on the disparity between willingness to pay and compensation demanded abstract recent experimental work showing a disparity between willingness to pay for and compensation demanded to give up lottery tickets is contrary to economists ideas about rationality presented here are the results of experiments in which subjects participate in second price auctions to indicate willingness to pay and compensation demanded for lottery tickets that have fixed odds of winning or losing money when the auction institution used has truthful revelation of preferences as the dominant strategy and that strategy is announced to subjects the difference between the measures of value decreases significantly the within subject comparison design provides a more discriminating measure of behavior than between subject comparison designs used previously

income based environmental responsibility abstract a strong mitigation effort is underway to reduce the levels of anthropogenic greenhouse gas emissions an allocation of the mitigation effort among multiple agents requires understanding which agent is responsible for what emissions according to a defined measure of carbon responsibility the metric adopted by current international climate policy is production based or territorial responsibility however other types of responsibility have been discussed in the literature namely consumption based or upstream responsibility and downstream responsibility in this paper we study the latter which is little explored in the literature we clarify the term through a novel nomenclature income based responsibility and present a case study with the quantification of income based responsibility for 112 world regions and the comparison of the results with production and consumption based responsibilities

risk uncertainty and entrepreneurship evidence from a lab in the field experiment theory predicts that entrepreneurs have distinct attitudes toward risk and uncertainty but empirical evidence is mixed to better understand the unique behavioral characteristics of entrepreneurs and the causes of these mixed results we perform a large lab in the field experiment comparing entrepreneurs to managers a suitable comparison group and employees n 2 288 the results indicate that entrepreneurs perceive themselves as less risk averse than managers and employees in line with common wisdom however when using experimental incentivized measures the differences are subtler entrepreneurs are only found to be unique in their lower degree of loss aversion and not in their risk or ambiguity aversion this combination of results might be explained by our finding that perceived risk attitude is not only correlated to risk aversion but also to loss aversion overall we therefore suggest using a broader definition of risk that captures this unique feature of entrepreneurs their willingness to risk losses this paper was accepted by uri gneezy behavioral economics

consistent and unbiased carbon dioxide emission multipliers performance of danish emission reductions via external trade abstract climate change research is currently a topic of great interest for economic researchers in particular environmental input output analysis increasingly plays an important role in measuring the economic and environmental effects of sustainable development policies in europe other approaches also exist such as econometric modelling in which impacts are quantified on statistical grounds and with certain desirable properties efficient estimates confidence intervals hypothesis testing etc that are not found in the input output approach consequently this paper merges the two approaches to address the calculation of unbiased and consistent carbon dioxide emission multipliers for denmark and their respective confidence intervals the use of the supply and use system instead of the symmetric input output table also presents the opportunity to avoid the common problems associated with the construction of technical coefficients technology assumptions negatives etc moreover a new policy relevant application of these multipliers is introduced the quantification of the performance of the carbon dioxide emission reductions carried out by industries via external trading

leontief versus ghoshian price and quantity models the classical demand driven input output model dates back to leontief 24 25 its economically complete opposite the so called supply driven input output model was developed almost forty years ago by ghosh 16 whereas its first application came more than ten years later by augustinovics 1 followed by giarratani 18 the first theoretical reservations were formulated another ten years later by giarratani 19 and oosterhaven 31 140 1 despite these reservations the model came more or less en vogue in the 1980s several applications appeared at best paying only lip service to this earlier critique 10 5 moreover without much reservations the model also entered the major input output textbook 28 317 22 while uncritical generalizations and reiterations appeared in the theoretical literature 8 3 9 then a heavy discussion about the economic underpinning of the supply driven quantity model was initiated by oosterhaven 33 36 21 34 with that debate the enthusiasm to perform downright applications of the supply driven model seems to have diminished literally in the footnotes of that debate the non existence the mathematics and the possible economic interpretation of the dual price version of the supply driven model was discussed 33 34 independently of this discussion davar 9 presented the dual model in extension but did not discuss the economic plausibility of the underlying economic assumptions nor their implications in view of the misinterpretations and misuse of the quantity version of the supply driven model this contribution aims at an early evaluation of its price version that is as complete and as balanced as possible it is well known that the dual version of the regular input output model is used to simulate cost push inflationary processes 26 188 201 7 246 other applications relate to for instance the price effects of pollution abatement 17 effects of rising energy cost 29 and energy price effects in multiregional or in extended interregional models 35 32 of course this dual price version of the leontief model is based on the same stringent standard assumptions of the quantity version and on some heavy additional assumptions that are made for the price version 37 naturally the potential use of the dual of the supply driven model lies in the simulation of demand pull inflationary processes as opposed to the cost push applications of the dual leontief model hence part of our evaluation will be directed toward the question whether such applications are justified from an economic point of view or not our discussion will start in the next section with a brief summary of the leontief quantity and

willingness to pay and compensation demanded experimental evidence of an unexpected disparity in measures of value aside from possible income effects measures of the maximum amounts people will pay to avoid a loss and the minimum compensation necessary for them to accept it are generally assumed to be equivalent unexpectedly wide variations between these sums however have been noted in survey responses to hypothetical options this paper reports the results of a series of experiments that confronted people with actual money payments and cash compensations the results indicate that the compensation measure of value seems to exceed significantly the willingness to pay measure which would appear to call into some question various rules of entitlement damage assessments and interpretations of indifference curves

multi dimensional reference dependent preferences in sealed bid auctions how most laboratory experiments differ from the field abstract we study bidding behavior in first and second price sealed bid auctions with loss averse agents our model predicts overbidding in first price induced value auctions consistent with evidence from most laboratory experiments substantially different bidding behavior could result in commodity auctions where money and auction item are consumed along different dimensions of the consumption space differences also result in second price auctions our study thereby indicates that transferring qualitative behavioral findings from induced value laboratory experiments to the field may be problematic if subjects are loss averse

a two stage econometric method for the estimation of carbon multipliers with rectangular supply and use tables abstract the supply use based econometric sube approach was proposed to calculate stochastic input output multipliers from rectangular supply use tables under the product technology assumption however the resulting total use of direct requirements stimulated by final demand be they carbon emissions labor etc may differ from the actual total use of direct requirements to solve this problem we propose in this paper a two stage sube approach which takes as prior the initially estimated sube multipliers and obtains a posterior set of two stage sube multipliers by constrained least squares minimization we illustrate the results with an empirical application for carbon emissions in the portuguese economy in 2005

positive framing does not solve the tragedy of the commons we investigate whether positive framing increases cooperation in three social dilemmas with slightly different properties a linear public goods pg game a non linear pg game and a common pool resource cpr game results from our laboratory experiments show that contributions to a linear pg are higher if the externality is framed positively rather than negatively corroborating earlier findings by andreoni 1995 by contrast we find no such framing effects in the non linear pg game or the cpr game in these games the best response in the material payoffs is to contribute less if others contribute more counteracting effects of pro social preferences positive framing therefore does not help to solve the tragedy of the commons

values of gains and losses reference states and choice of measure the available empirical evidence continues to suggest that people commonly value losses more and often much more than otherwise commensurate gains consequently current practice of using the wtp measure for all changes is often likely to lead to misleading assessments of welfare changes the reference dependence of preferences implies instead that while the wtp measure is appropriate for gains the value of both positive and negative changes in the domain of losses will usually be more accurately assessed with the wta measure