A satisfactory benefit cost indicator from contingent valuation

Abstract Standard economic concepts are used to develop a model of individual behavior when subject to the constraints of the contingent valuation choice context. The model yields refutable consequences that are consistent with previously reported empirical findings, including some that have been thought to be anomalous. The model is used to show that different contingent valuation formats have predictably different performance characteristics. Notably, the Hicksian compensating measures are satisfactory benefit cost indicators when elicited using any one of several formats identified in the text. Of the formats examined, one form of a policy referendum appears to have the most satisfactory characteristics. Overall, we conclude that contingent valuation is a progressing research program.

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