semi nonparametric distribution free dichotomous choice contingent valuation abstract we apply a semi nonparametric distribution free estimator for binary discrete response data to the estimation of a dichotomous choice contingent valuation model using this estimator mean and median compensating and equivalent variation can be consistently estimated without making nontheoretically motivated assumptions on consumer preferences the approach is illustrated using a contingent valuation survey of willingness to pay for reduction of risk of premature death due to exposure to hazardous waste we find that a conventional parametric estimator and the proposed estimator give similar estimates of unconditional wtp but that conditional on explanatory variables the estimates are quite different

news and sovereign default risk in small open economies this paper builds a unified model of sovereign debt default risk and news shocks news shocks improve the quantitative performance of the sovereign default model in a number of empirically relevant dimensions first with news shocks not all defaults occur during downturns second the news shocks help account for key differences between developing and more developed economies as the precision of news improves the model predicts lower variability of consumption less countercyclical trade balance and interest rate spreads as well as a higher level of debt in line with more developed economies third the model captures the hump shaped relationship between default rates and the precision of news obtained from the data finally the news shocks have a nonmonotonic effect on welfare

willingness to pay for voluntary climate action and its determinants field experimental evidence the determinants of individual voluntary climate action vca in combating climate change and its potential scale are frequently debated in public but largely underresearched we provide estimates of the willingness to individually reduce eu greenhouse gas emissions by one ton using the european union emissions trading scheme estimates are derived from an online field experiment with a large highly heterogenous and internet representative sample of voting aged germans jointly estimating willingness to pay wtp non indifference to vca and prior knowledge we uncover important determinants of preferences for vca such as education the information structure among the population and exogenous environmental conditions

modelling unobserved heterogeneity in contingent valuation of health risks human preferences for alternative levels of health risks can be heterogeneous in this paper a flexible distribution approach to model health values elicited with the dichotomous choice contingent valuation method is considered rigid parametric structures cannot model sample heterogeneity while imposing strong assumptions on the error distribution a mixture of normal distributions is considered which can approximate arbitrary well any empirical distributions as the number of mixtures increases the model is applied to data on willingness to pay for reducing the individual risk of an episode of respiratory illness the mixture distribution model is compared with the rigid probit model using a bayes factor test the results show that the mixture modelling approach improves performance while allowing for the consideration of alternative groups of individuals with different preferences for health risks

news sovereign debt maturity and default risk abstract leading into a debt crisis interest rate spreads on sovereign debt rise before the economy experiences a decline in productivity suggesting that news about future economic developments may play an important role in these episodes an empirical var estimation shows that a news shock has a larger contemporaneous impact on sovereign credit spreads than a comparable shock to labor productivity a quantitative model of news and sovereign debt default with endogenous maturity choice generates impulse responses and a variance decomposition similar to the empirical var estimates the dynamics of the economy after a bad news shock share some features of a productivity shock and some features of sudden stop events however unlike during sudden stop episodes long term debt does not shield the country from bad news shocks and it may even exacerbate default risk finally an increase in the precision of news allows the government to improve its debt maturity management especially during periods of high stress in credit markets and thus face lower yield spreads while increasing the amount of debt

rational expectations in microeconomic models an overview abstract this paper is an expository introduction to several topics of current research in the general equilibrium theory of rational expectations more specifically we discuss the existence of exact and approximate rational expectations equilibria the implementation of equilibria the behavior of learning and smoothing processes by which traders construct expectations from repeated observations of the market and the lagged use of the information revealed by prices in an intertemporal sequence of markets the purpose of this discussion is to introduce papers on these topics appearing in the journal of economic theory symposium on rational expectations in microeconomic models

news driven business cycles in small open economies the focus of this paper is on news driven business cycles in small open economies we make two significant contributions first we develop a small open economy model where the presence of financial frictions permits the replication of business cycle co movements in response to news shocks second we use var analysis to identify news shocks using data on four advanced small open economies we find that expected shocks about the future total factor productivity generate business cycle co movements in output hours consumption and investment we also find that news shocks are associated with countercyclical current account dynamics our findings are robust across a number of alternative identification schemes

strict rational expectations equilibria with diffuseness abstract for smooth static pure exchange economies under uncertainty it is shown that a diffuseness condition on the distribution of traders characteristics as the state of the world varies permits one to use only a weak dimensionality restriction in the proof of the genericity of existence of strict rational expectations equilibria a generic result on the amount of information conveyed by equilibrium price functions and comparisons with some examples of nonexistence are given

on the generic existence of fully revealing price equilibria abstract in an asset trading model the generic existence of rational expectations equilibrium established by radner requires an assumption which is not shown to be generic a regularity condition is imposed on the relative risk aversion of the utility function to eliminate the assumption

rational expectations equilibrium an alternative approach we study a dynamic market process in which traders condition their beliefs about payoff relevant parameters on past endogenously generated market data and current exogenous data we say that a market process is informative if the beliefs of traders who receive only endogenously generated market data converge almost surely to the true parameter value our main result is that under standard regularity hypotheses the generic market process is informative we define an equilibrium as the limit points of the market process journal of economic literature classification numbers 02 1 026 c 1984 academic press inc

optimal bid selection for dichotomous choice contingent valuation surveys abstract this paper develops a model for optimal survey design for the dichotomous choice contingent valuation method that finds the bid amounts as well as the sample sizes corresponding to each bid the model uses an iterative procedure to select the survey design that minimizes the mean square error of the welfare measure a set of monte carlo simulations shows that the model produces significantly lower mean squared errors for the welfare estimate than the next best model produces survey design under alternative assumptions regarding the statistical distribution of the welfare measure is also addressed the model produced significantly different survey designs depending on whether the distribution was assumed to be symmetric or asymmetric

bayesian analysis of interval data contingent valuation models and pricing policies the general aim of a contingent valuation survey is to elicit the willingness to pay wtp of respondents for some public commodity without a clear market price this could be a program to protect some environmental resource or as in our application the access to a recreational area of particular interest in this context we want to accommodate the possibility of zero wtp and we need to deal with the fact that observations arise as intervals for wtp rather than point observations we propose a flexible bayesian statistical analysis of wtp as a function of characteristics of the respondents that formally incorporates this structure through a mixture model we consider model uncertainty and pay particular attention to the predictive distribution of revenue if a certain entry price were asked the latter is an important tool for deriving pricing policies

news shocks in open economies evidence from giant oil discoveries this article explores the effect of news shocks in open economies using worldwide giant oil and gas discoveries as a directly observable measure of news shocks about future output the delay between a discovery and production is on average four to six years we first analyze the effects of a discovery in a two sector small open economy model with a resource sector we then estimate the effects of giant oil and gas discoveries on a large panel of countries our empirical estimates are consistent with the predictions of the model after an oil or gas discovery the current account and saving rate decline for the first five years and then rise sharply during the ensuing years investment rises robustly soon after the news arrives whereas gdp does not increase until after five years employment rates fall slightly and remain low for a sustained period

the effect of protest votes on the estimates of wtp for use values of recreational sites contingent valuation studies are often characterized by a considerable number of protest responses which may cause selectivity bias on the final estimates for wtp sample selection models can detect and if necessary correct selectivity bias in economic applications where the relevant dependent variable is continuous sample selection models are generally estimated using heckman s 2 step method rather than the fiml estimator either method has its own drawback computational complexity for the fiml method susceptibility to collinearity problems for the 2 step method using data on valuation of forest resources for recreational use we analyse the performance of the two estimators in this application given the presence of some collinearity the fiml is preferred to the 2 step method a procedure is outlined to deal with selectivity problems in similar settings

a new paradigm for valuing non market goods using referendum data maximum likelihood estimation by censored logistic regression abstract this paper challenges the w m hanemann amer j agr econom 66 332 341 1984 and c sellar j p chavas and j r stoll j environ econom management 13 382 390 1986 utilizations of logit models to estimate the value of non market resources from referendum survey data these data are more informative than conventional choice data the random utility interpretation of logit models is therefore too restrictive bypassing the utility function entirely it will be shown that parameters and standard errors for utility theoretic inverse hicksian demand functions can be extracted directly and much more simply estimated demand functions need not be limited to those corresponding to the linear in parameters utility difference specifications which can be handled by packaged logit programs

asset prices news shocks and the trade balance we analyze the relationship between asset prices and the trade balance estimating a bayesian var for a broad set of 38 industrialized and emerging market countries to derive model based identifying restrictions we model asset price shocks as news shocks about future productivity in a two country dynamic stochastic general equilibrium model such shocks are found to exert sizable effects on the trade balance moreover the effects are highly heterogeneous across countries for instance following a news shock that implies on impact a 10 increase in domestic equity prices relative to the rest of the world the u s trade balance will worsen by up to 1 0 percentage points but much less so for most other economies we find that this heterogeneity appears to be linked to the financial market depth and equity home bias of countries moreover the channels via wealth effects and via the real exchange rate are important for understanding the heterogeneity in the transmission

understanding expectation driven fluctuations a labor market approach this paper presents a uni ed analysis of neoclassical models that can generate expectation driven business cycles under anticipated future technology shocks or news shocks it shows that the ability or inability of various rbc models to generate positive comovement of aggregate variables hinges crucially on the structure of the labor market equilibrium the analysis provides a simple and intuitive guide to understanding the existing literature and to searching for new models that can explain the data under news shocks

when can changes in expectations cause business cycle fluctuations in neo classical settings abstract it is often argued that changes in expectation are an important driving force of the business cycle however it is well known that changes in expectations cannot generate positive co movement between consumption investment and employment in the most standard neo classical business cycle models this gives rise to the question of whether changes in expectation can cause business cycle fluctuations in any neo classical setting or whether such a phenomenon is inherently related to market imperfections this paper offers a systematic exploration of this issue our finding is that expectation driven business cycle fluctuations can arise in neo classical models when one allows for a sufficiently rich description of the production technology however such a structure is rarely allowed or explored in macro models in particular we identify a multi sector setting and a setting with a costly distribution system in which expectation driven business cycles can arise

technological revolutions and the three great slumps a medium run analysis abstract the great recession the great depression and the japanese slump of the 1990s were all preceded by periods of major technological innovation which happened about 10 years before the start of the decline in economic activity we estimate a model with noisy news we find that beliefs about long run income adjust to permanent shifts in productivity with an important delay the estimation tells a common and simple story for the observed dynamics of productivity and consumption on a 20 to 25 year window our analysis highlights the advantages of a look at this data from the point of view of the medium run

expectation driven business cycles with limited enforcement we explore shocks to expected future productivity in a model with limited enforcement of financial contracts a microfounded collateral constraint implies that good news about future productivity yield an increase in stock prices available credit and a general economic expansion

the generic existence of rational expectations equilibrium in the higher dimensional case abstract the study of the generic existence of rational expectations equilibrium has concentrated on three cases according to whether the space of states of private information has dimension less than equal to or greater than the price space previous results have shown that in the first case fully revealing equilibria exist generically and in the second case there are open sets of environments with no equilibrium this paper shows that in the third case there is a residual set of environments which permits equilibria which are arbitrarily close to fully revealing

flexible functional form estimation of willingness to pay using dichotomous choice data abstract this paper introduces fully flexible semi nonparametric methods for calculating willingness to pay wtp bounded between zero and the respondent s income for dichotomous choice contingent valuation a method to estimate median wtp using fully flexible functional forms is also presented finally the numerical illustration demonstrates the importance of considering jensen s inequality in calculating wtp with nonlinear models

flexible mixture distribution modeling of dichotomous choice contingent valuation with heterogenity abstract this paper considers the performance of a model of mixture normal distributions for dichotomous choice contingent valuation data which allows the researcher to consider unobserved heterogeneity across the sample the model is flexible and approaches a semi parametric model since the normality assumption can be removed by augmenting the number of mixture distributions bayesian inference allows for simple estimation of the model and is particularly appropriate for conducting inference with finite data sets the proposed model is compared with other semi parametric and parametric approaches using monte carlo simulation under alternative assumptions regarding heteroskedasticity and heterogeneity in sample observations it is found that the mixture normal model reduces bias and improves performance with respect to an alternative semi parametric model particularly when the sample is characterized by heterogeneous preferences the application of the model to empirical data on the recreational value of natural areas in the canary islands confirmed the expected results

semiparametric estimation of the binary choice model for contingent valuation this paper is concerned with the estimation of the binary choice model without imposing any parametric structure on the distribution of the stochastic term we adapt the distribution free maximum l

the existence of fully rational expectations approximate equilibria with noisy price observations abstract nonrevealing fully rational expectations approximate equilibria exist in microeconomic pure exchange economies in which uninformed agents have suitably dispersed noisy price observations such traders maximize a state dependent expected utility conditional on the price vector they observe the distributions of noisy price observations and the correct equilibrium relationship between states of the world and prices in equilibrium aggregate excess demand is small with high probability in every state of the world and its expectation is also small this magnitude diminishes as the noisy price observations become more accurate equilibria are obtained by applying a fixed point argument to state dependent excess demand functions which are smooth because of the noisy price observations

monetary policy in a financial crisis what are the economic effects of an interest rate cut when an economy is in the midst of a financial crisis under what conditions will a cut stimulate output and employment and raise welfare under what conditions will a cut have the opposite effects we answer these questions in a general class of open economy models where a financial crisis is modeled as a time when collateral constraints are suddenly binding we find that when there are frictions in adjusting the level of output in the traded good sector and in adjusting the rate at which that output can be used in other parts of the economy then a cut in the interest rate is most likely to result in a welfare reducing fall in output and employment when these frictions are absent a cut in the interest rate improves asset positions and promotes a welfare increasing economic expansion

binary choice valuation studies with heteregeneous preferences regarding the program being valued we investigate the effect of respondents heterogeneous preferences regarding the good to be valued in binary choice contingent valuationstudies this is especially important when the valuation options give rise to both highly negative and highly positive attitudes the survey design employs questionnaires which include separate items for willingness to favorandwillingness to contribute in monetary terms to the provision of the good in light of our analysis eliciting respondents differentpreferences for the project first without monetary considerations wouldimprove the wtp estimates as welfare measures our results alsosuggest that nonparametric estimation could offer another solution foraccounting for preference heterogeneity nonparametric estimation is less sensitive to those no responses which are in fact not intended toreflect the respondents wtp as such but merely to express their dislikefor the good at issue

ex post regret and the decentralized sharing of information abstract firms reveal private information about the value of investment through their investment decisions as a consequence they may have ex post regret once they see other firms investments we define a notion of rational expectations equilibrium for games which imposes a no regret property in this equilibrium all firms make the same investment decision but despite the absence of ex post regret the investment herd can be inefficient in addition equilibrium might not exist we introduce a notion of probabilistic existence and identify conditions under which if the number of firms is large enough information comes out so that investment herds are first best efficient with high probability and equilibrium exists with high probability journal of economic literatureclassification numbers c7 d8

allowing for zeros in dichotomous choice contingent valuation models dichotomous choice contingent valuation data are modeled using a mixture distribution the standard parametric survival model is modified such that respondents in the lowest willingness to pay category may have either zero willingness to pay or a small positive willingness to pay in comparison to the standard model the mixture model leads to a dramatic reduction in estimates of mean willingness to pay covariates such as income are found to be more significant in determining the positive portion of the distribution of willingness to pay

sudden stops and output drops in recent financial crises and in recent theoretical studies of them abrupt declines in capital inflows or sudden stops have been linked with large drops in output do sudden stops cause output drops no according to a standard equilibrium model in which sudden stops are generated by an abrupt tightening of a country s collateral constraint on foreign borrowing in this model in fact sudden stops lead to output increases not decreases an examination of the quantitative effects of a well known sudden stop in mexico in the mid 1990s confirms that a drop in output accompanying a sudden stop cannot be accounted for by the sudden stop alone to generate an output drop during a financial crisis as other studies have done the model must include other economic frictions which have negative effects on output large enough to overwhelm the positive effect of the sudden stop this abstract was borrowed from another version of this item

generic existence of completely revealing equilibria for economies with uncertainty when prices convey information conditions which imply the existence of strict rational expectations equilibria for most static pure exchange economies where prices convey information about the state of the world are analyzed information is aggregated and transmitted by prices because agents have different initial information and maximize the conditional expectation of state dependent utility functions major results state that if with probability one agents characteristics do not vary too much as the state of the world varies then generically there exist equilibrium price functions which reveal all initial information more precisely if the support of the image measure is contained in a compact c1 manifold satisfying some technical conditions which is of sufficiently low dimension relative to the number of commodities then existence of completely revealing equilibria is generic any economy satisfying these assumptions can be approximated by a sequence of economies which also obey these assumptions and have completely revealing equilibrium price functions slight perturbations do not destroy the existence property

admissible market data structures a complete characterization abstract this paper characterizes the market data which if observed by traders in a stochastic exchange environment will permit the general existence of rational expectations equilibria it is proved that if a trader observes and conditions his expectations on some nonconstant market data he must observe at least the equilibrium price and his own equilibrium trade any data which do not satisfy this requirement such as the price alone or the price and the volume of trade will fail to permit the existence of an expectations equilibrium for some otherwise well behaved stochastic environment

news driven business cycles insights and challenges there is a widespread belief that changes in expectations may be an important independent driver of economic fluctuations the news view of business cycles offers a formalization of this perspective in this paper we discuss mechanisms by which changes in agents information due to the arrival of news can cause business cycle fluctuations driven by expectational change and we review the empirical evidence aimed at evaluating their relevance in particular we highlight how the literature on news and business cycles offers a coherent way of thinking about aggregate fluctuations while at the same time we emphasize the many challenges that must be addressed before a proper assessment of the role of news in business cycles can be established jel d83 d84 e13 e32 o33

spike models in contingent valuation spike models allow for a nonzero probability of zero willingness to pay in referendum style contingent valuation experiments they include many of the often used models as special cases and allow various analyses that are not possible in standard applications in this paper the economic rationale for the spike models and their estimation techniques are discussed and empirical illustrations are provided one study suggests that mean willingness to pay is zero and both studies strongly suggest that median wtp is zero these results have some bearing on the continuing debate of the incentive properties of hypothetical surveys and the construction of scenarios in contingent valuation experiments

a dynamic small open economy model with involuntary unemployment it is well known that real business cycle small open economy soe models rely on greenwood hercowitz and huffman 1988 preferences to match the countercyclical trade balance observed in open economies as well as other second moments while standard preferences a la king plosser and rebelo 1988 are commonly labelled ineffective owing to their inability to yield the countercyclical trade balance in this paper i show that an soe model with standard preferences and involuntary unemployment with efficient risk sharing can obtain a countercyclical trade balance and match main empirical regularities in small open economies il est bien connu que les modeles de cycles d affaires reels dans une petite economie ouverte peo comptent sur des preferences a la greenwood hercowitz et huffman 1988 pour etre compatibles avec la balance commerciale contre cyclique observee dans les economies ouvertes ainsi que sur d autres second moments alors que les preferences standards a la king plosser et rebelo 1988 sont considerees comme ineffectives a cause de leur inhabilitea engendrer la balance commerciale contre cyclique dans ce texte l auteur montre qu un modele de peo avec preferences standards et chomage involontaire et partage efficient du risque peut engendrer une balance commerciale contre cyclique et s arrimer aux principales regularites observees dans les petites economies ouvertes

an exploration into pigou s theory of cycles abstract this paper explores a theory of business cycles in which recessions and booms arise due to difficulties encountered by agents in properly forecasting the economy s future needs in terms of capital the idea has a long history in the macroeconomic literature as reflected by the work of pigou industrial fluctuation macmillan london 1926 the contribution of this paper is twofold first we illustrate the type of general equilibrium structure that can give rise to such phenomena second we examine the extent to which such a model can explain the observed pattern of u s recessions frequency depth without relying on technological regress we argue that such a model offer a framework for understanding elements of both the recent u s recession and of the asia downturns of the late 1990s

parametric and semi nonparametric estimation of willingness to pay in the dichotomous choice contingent valuation framework standard procedures for extractingwillingness to pay wtp from dichotomouschoice cv questionnaires rely heavily uponparametric assumptions regarding thedistribution and form of wtp in the sampledpopulation however theory provides littleguidance regarding which parametricspecification to use and the resulting wtpestimates can be sensitive to the selectionsmade here we compare and contrast severalparametric and semi nonparametric estimatorsthat have been proposed in the literature examining the sensitivity of the resulting wtpestimates to the underlying distribution ofpreferences and the estimation procedureemployed

information and effort in contingent valuation surveys application to global climate change using national internet samples this contingent valuation study investigates the issues of information access and respondent effort and is based on a series of national internet samples the focus is on a split sample treatment basic information bi versus enhanced information ei in the latter significantly expanded information is provided about global climate change and the kyoto protocol using a referendum format we compare the treatment effect bi versus ei on willingness to pay wtp we develop measures of respondent effort in accessing optional information through the technology of web based surveys and jointly model effort and wtp using a simultaneous estimation approach results support the use of the joint modeling approach for objective measures of respondent effort and wtp respondent effort is shown to be positively and significantly related to wtp however use of the optional menu is rather modest counts of pages and time spent and is highly variable both across pages and respondents

dichotomous choice contingent valuation with dont know responses and misreporting a new approach is presented that simultaneously deals with misreporting and don t know dk responses within a dichotomous choice contingent valuation framework utilising a modification of the standard bayesian probit framework a gibbs with metropolis hastings algorithm is used to estimate the posterior densities for the parameters of interest several model specifications are applied to two contingent valuation datasets one on wolf management plans and one on the us fee demonstration program we find that dks are more likely to be from people who would be predicted to have positive utility for the bid therefore a dk is more likely to be a yes than a no we also find evidence of misreporting primarily in favour of the no option the inclusion of dk responses has an unpredictable impact on willingness to pay estimates since it impacts differently on the results for the two datasets we examine copyright c 2009 john wiley sons ltd

discrete choice under preference uncertainty an improved structural model for contingent valuation abstract this paper is concerned with discrete choice contingent value estimation in the presence of response errors we attempt to extend the theoretical frameworks developed by hanemann 1984 amer j agric econom 66 332 341 and cameron 1988 j environ econom management 15 355 379 by introducing preference uncertainty with individual respondents we assume that respondents have incomplete knowledge about their true valuation of a nonmarket resource and thus may give wrong yes no answers on whether or not to pay a given bid amount for the resource a post decisional confidence measure for each observed yes no answer is elicited for characterizing the degree of preference uncertainty with the help of this confidence measure we develop an improved structural model for deriving value estimates data from a forest environment valuation survey are used for the empirical estimations

addressing negative willingness to pay in dichotomous choice contingent valuation this paper has four purposes first we outline the controversy surroundingthe issue of negative willingness to pay wtp in contingent valuation cv studies second we use monte carlo simulation to examine theperformance of alternative distributionalassumptions in estimating wtp in the presenceof varying proportions of the populationholding negative wtp values we focus ondichotomous choice cv dc cv where negativewtp values may be especially difficult todetect third we extend the simulation toinvestigate the performance of the mixturemodels that have recently been proposed forhandling identifying non positive wtp values fourth we extend the simulation to investigatethe performance of the nonparametric lowerbound turnbull approach results indicate thatthe relative performance of the dc cv modelingalternatives evaluated here which assumepositive wtp varies across the simulationsetting e g proportion of negative wtp butnone can be said to reasonably solve theproblem ex post this underscores theimportance of ex ante efforts to identify ifnegative wtp is likely to be prominent in agiven valuation setting in such cases appropriately handling negative wtp must beaddressed through ex ante survey design andmodeling choices that allow negative wtp

portfolio allocation and international risk sharing we show that recent explanations of the consumption real exchange rate anomaly that rely on goods and financial market frictions are not robust to introducing just one additional international asset when portfolios are selected optimally international trade in two nominal bonds implies a consumption real exchange rate correlation that is too high compared with the data even when there are many shocks monetary policy specification plays a potentially important role for the degree of risk sharing provided by nominal bonds both in the benchmark model with only tradable and non tradable sector supply shocks and also in the model that allows for news

contingent valuation and social choice the contingent valuation method for estimating the existence value of natural resources is examined for psychophysical robustness statistical reliability and economic sensibility extensions of standard models for willingness to pay and suitable econometric techniques for analyzing these models are developed the analysis is applied to a series of experiments on the value of preserving wilderness areas in the western united states the results call into question the reliability of the cv method for estimating existence values

nonparticipation or misspecification the impacts of nonparticipation on dichotomous choice contingent valuation dichotomous choice or referendum contingent valuation surveys have become the predominate choice for valuing goods and services otherwise not valued in a standard market nonmarket goods and services a number of researchers have recently recommended that dichotomous choice contingent valuation studies include a follow up question to all no responses to determine whether the no response is a result of unwillingness to pay or nonparticipation if the goal of the study is to investigate the impact of covariates on either mean willingness to pay or the probability of nonparticipation simple identification of indifferent individuals will not suffice a simulation study shows that existing econometric models designed to account for nonparticipation are extremely sensitive to misspecification bias accurate identification of the probability of nonparticipation is hampered by potential misspecification of the distribution of willingness to pay

modelling willingness to pay responses from dichotomous choice contingent valuation surveys with zero observations modelling household behaviour with the data from dichotomous choice contingent valuation dccv surveys is often complicated by zero willingness to pay wtp responses in the sample to deal with the zero responses a two equation model is considered which incorporates a two level decision structure a decision on whether to participate in having wtp and a decision on the wtp amount conditional on deciding to participate and two separate stochastic processes that determine the probability and conditional level of wtp are featured the model is empirically applied to household survey data in which the dccv questions concerned the benefits of air quality improvement in korea to put the issue of the two equation model in perspective this paper also experiments with economic and econometric specifications utility theoretic restriction and heteroscedasticity it is shown how failure to allow for the restriction distorts aggregate benefit estimates and the existence of heteroscedasticity in error term is

approximate equilibria in microeconomic rational expectations models abstract for general equilibrium models in which prices transmit information among asymmetrically informed traders strict rational expectations approximate equilibria are defined a state dependent price function is an e equilibrium if when agents use their own information and that conveyed by prices aggregate excess demand in each state of the world does not exceed e for any positive e existence requires only very mild assumptions continuity and compact support moreover there are revealing e equilibria for all smooth economies satisfying a dimensionality condition in an open neighborhood of this case existence of maximally revealing e equilibria holds

news and business cycles in open economies we study the effects of news about future total factor productivity tfp in a small open economy we show that an open economy version of the neoclassical model produces a recession in response to good news about future tfp we propose an open economy model that generates comovement in response to tfp news the key elements of our model are a weak short run wealth effect on the labor supply and adjustment costs to labor and investment we show that our model also generates comovement in response to news about future investment specific technical change and to sudden stops

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

reconciling jaimovich rebello preferences habit in consumption and labor supply abstract this note studies a form of a utility function of consumption with habit and leisure that a is compatible with long run balanced growth b hits a steady state observed target for hours worked and c is consistent with micro econometric evidence for the inter temporal elasticity of substitution and the frisch elasticity of labor supply employing jaimovich rebello preferences our results highlight a constraint on the preference parameter needed to target the steady state frisch elasticity this leads to a lower bound for the latter that cannot be reconciled empirically with external habit but the introduction of a labor wedge solves the problem we also propose a dynamic frisch inverse elasticity measure and examine its business cycle properties

willingness to pay and sensitivity to time framing a theoretical analysis and an application on car safety stated preference sp surveys attempt to obtain monetary values for non market goods that reflect individuals true preferences numerous empirical studies suggest that monetary values from sp studies are sensitive to survey design and so may not reflect respondents true preferences this study examines the effect of time framing on respondents willingness to pay wtp for car safety we explore how wtp per unit risk reduction depends on the time period over which respondents pay and face reduced risk in a theoretical model and by using data from a swedish contingent valuation survey our theoretical model predicts the effect to be nontrivial in many scenarios used in empirical applications in our empirical analysis we examine the sensitivity of wtp to an annual and a monthly scenario our theoretical model predicts the effect from the time framing to be negligible but the empirical estimates from the annual scenario are about 70 higher than estimates from the monthly scenario

anticipated growth and business cycles in matching models in a business cycle model that incorporates a standard matching framework employment increases in response to news shocks even though the wealth effect associated with the increase in expected productivity reduces labor force participation the reason is that the matching friction induces entrepreneurs to increase investment in new projects and vacancies early if there is underinvestment in new projects in the competitive equilibrium then the efficiency gains associated with an increase in employment make it possible that consumption employment output as well as the investment in new and existing projects jointly increase long before the actual increase in productivity materializes if there is no underinvestment then investment in existing projects decreases but total investment consumption employment and output still jointly increase

the value of household water service quality in lahore pakistan most existing literature focuses on the benefits of establishing basic drinking water access for unserved populations the extensive water supply margin in contrast this article examines the intensive margin the benefits of improving water service to under served households a growing population in developing country cities we use contingent valuation to estimate willingness to pay wtp for improved piped water quality and reductions in supply interruptions among a sample of 193 households in lahore pakistan the distribution of wtp is described using parametric and non parametric models results indicate that households in lahore are willing to pay about 7 50 to 9 per month for piped water supply that is clean and drinkable directly from the tap comparable to the monthly cost of in home water treatment and about three to four times the average monthly water bill for sample households using piped water estimates of wtp for reducing supply interruptions are both smaller and more difficult to interpret since a significant fraction of the estimated wtp distribution for supply improvements is negative all of our wtp estimates are well below 4 of monthly household income the world bank s benchmark upper bound for affordable water service

determinants of the price premium for green energy evidence from an oecd cross section using data from a survey of households in 11 oecd countries this paper investigates the determinants of preferences for a completely green residential electricity system three important questions are addressed i how much are households willing to pay to use only renewable energy ii does willingness to pay wtp vary significantly across household groups and countries and iii what drives the decision to enter the hypothetical market for green energy and given entry what drives the level of wtp the analysis here differs from previous studies on green energy in two ways first data and analyses are comparable across countries and second a comprehensive attempt is made to understand 0 wtp and to accommodate using a censored quantile regression cqr framework unobserved heterogeneity the survey data indicate a low wtp at 11 12 of current electric bill this study also addresses a key question how important is income for understanding wtp relative to more attitudinal determinants the effect of income overall appears ambiguous with tobit like models indicating that income is not significant while the cqr indicates that income exerts a significant effect near the center of the distribution of wtp across all frameworks used a key determinant of wtp appears to be environmental attitudes particularly membership in an environmental organization

modelling zero values and protest responses in contingent valuation surveys in contingent valuation surveys the category of zero bidders refers to individuals that are not willing to pay anything for the programme under analysis specific questions can help to identify true zero values coming from people that are indifferent to the programme separately from protest responses the latter are generally excluded from the analysis this paper introduces a mixture sample selection model that takes into account both zero values and protest responses in the estimates the model is applied to the valuation of a traffic calming scheme aimed at reducing risks for residents in three villages in the north east of england

a semiparametric distribution for willingness to pay and statistical inference with dichotomous choice contingent valuation data this paper proposes a semiparametric willingness to pay distribution and discusses several aspects of statistical inference with dichotomous choice contingent valuation data we study likelihood based estimation of the model parameters with and without controlling for unobserved heterogeneity estimation of the mean and median willingness to pay and specification tests these statistical procedures are implemented using a data set in this application we find that a parametric model is rejected in favor of our semiparametric model that the heterogeneity can be adequately controlled using a simple density and that the semiparametric model offers more robust mean willingness to pay estimates

addressing heterogeneous preferences using parametric extended spike models some public programs simultaneously provide a mix of non rejectable public goods and public bads consequently some individuals would pay for the program while others might instead need to becompensated in this paper we estimate twoparametric extended spike models that accountfor positive and negative preferences as wellas indifference for the public good weillustrate the models using data on valuationof prescribed burning of underbrush in forests which reduces the risk of catastrophicwildfires but also produces smoke emissions the public bad we compare the two empiricalapproaches to estimate willingness to pay wtp for the program and contrast these results withthose obtained from modeling specificationsthat only account for non negative preferences substantial differences in public net benefitswere found between the most flexible parametricextended spike model and the simple spike modelwhere negative responses were coded as zero anda standard binary logit of only positivebidders the results from the extended spikemodels demonstrated that accounting forindifference and negative values towards thepublic good resulted in substantially lowerwillingness to pay estimates

partially revealing rational expectations equilibrium in a competitive economy abstract a class of pure exchange economies is considered in which some agents are informed of private information and others are uninformed existence of a partially revealing rational expectations equilibrium ree is proved without restricting attention to particular functional forms for utility functions and probability distributions without introducing noise into the model and without departing from the standard definition of ree the equilibrium is robust in the sense that if the primitives of the economy are slightly perturbed the economy continues to have a qualitatively similar ree with somewhat stronger assumptions placed on the economy the equilibrium is also the unique measurable ree

repeated dichotomous choice formats for elicitation of willingness to pay simultaneous estimation and anchoring effect repeated dichotomous choice contingent valuation data are generated from responses to a succession of binary questions regarding alternative prices for an environmental good in this paper we propose a simultaneous equation model that allows for endogeneity and error correlation across the responses at each stage of the bidding process the model allows us to study the evolution of anchoring effects after the second dichotomous choice question estimation involves the bayesian techniques of gibbs sampling and data augmentation and the application focuses on the preservation value of a natural area the results for a data set involving up to four successive dichotomous choice questions show that restricted multiple bounded models are rejected by the data with the general model in addition willingness to pay tends to stabilize after the second stage in the elicitation process for the general unrestricted model when taking anchoring effects into consideration it is revealed that individuals responses in the latter stages are influenced by the sequence of bid prices offered in earlier questions nevertheless they do not have a significant effect on welfare estimates