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Market simulation and the provision of public goods: A non-paternalistic response to anomalies in environmental evaluation

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  • Sugden, Robert

Abstract

Most normative economics assumes that individuals have coherent preferences. This paper responds to growing evidence of failures of this assumption, particularly in the context of stated-preference methods widely used in environmental policy analysis. It proposes a non-paternalistic concept of consumer sovereignty that does not assume preference coherence, is satisfied by competitive markets, and can be applied to the provision of public goods. A key implication is that decisions should reflect valuations revealed 'at the point of consumption'. Such valuations, which can be inferred from hedonic prices, may be less susceptible to willingness-to-accept (WTA)/willingness-to-pay (WTP) disparities than those elicited by stated-preference methods.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 57 (2009)
Issue (Month): 1 (January)
Pages: 87-103

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Handle: RePEc:eee:jeeman:v:57:y:2009:i:1:p:87-103

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Web page: http://www.elsevier.com/locate/inca/622870

Related research

Keywords: Market simulation Public goods Paternalism Environmental evaluation;

References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  1. Robert Sugden, 2004. "The Opportunity Criterion: Consumer Sovereignty Without the Assumption of Coherent Preferences," American Economic Review, American Economic Association, vol. 94(4), pages 1014-1033, September.
  2. Shogren, Jason F. & Seung Y. Shin & Dermot J. Hayes & James B. Kliebenstein, 1994. "Resolving Differences in Willingness to Pay and Willingness to Accept," American Economic Review, American Economic Association, vol. 84(1), pages 255-70, March.
  3. Chu, Yun-Peng & Chu, Ruey-Ling, 1990. "The Subsidence of Preference Reversals in Simplified and Marketlike Experimental Settings: A Note," American Economic Review, American Economic Association, vol. 80(4), pages 902-11, September.
  4. Cass R. Sunstein & Richard H. Thaler, 2003. "Libertarian paternalism is not an oxymoron," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, issue Jun.
  5. Gode, Dhananjay K & Sunder, Shyam, 1993. "Allocative Efficiency of Markets with Zero-Intelligence Traders: Market as a Partial Substitute for Individual Rationality," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 119-37, February.
  6. John A. List & Jason F. Shogren, 1999. "Price Information and Bidding Behavior in Repeated Second-Price Auctions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 942-949.
  7. Coursey, Don L & Hovis, John L & Schulze, William D, 1987. "The Disparity between Willingness to Accept and Willingness to Pay Measures of Value," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 679-90, August.
  8. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December.
  9. Barberis, Nicholas & Thaler, Richard, 2003. "A survey of behavioral finance," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 18, pages 1053-1128 Elsevier.
  10. Richard H. Thaler & Cass R. Sunstein, 2003. "Libertarian Paternalism," American Economic Review, American Economic Association, vol. 93(2), pages 175-179, May.
  11. Jason F. Shogren & Tommy Stamland, 2002. "Skill and the Value of Life," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1168-1197, October.
  12. Cherry, Todd L. & Crocker, Thomas D. & Shogren, Jason F., 2003. "Rationality spillovers," Journal of Environmental Economics and Management, Elsevier, vol. 45(1), pages 63-84, January.
  13. Todd L. Cherry & Jason F. Shogren, 2002. "Rationality Crossovers," Working Papers 02-03, Department of Economics, Appalachian State University.
  14. Graham Loomes & Chris Starmer & Robert Sugden, 2003. "Do Anomalies Disappear in Repeated Markets?," Economic Journal, Royal Economic Society, vol. 113(486), pages C153-C166, March.
  15. John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 41-71, February.
  16. Bateman, Ian J, et al, 1997. "A Test of the Theory of Reference-Dependent Preferences," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 479-505, May.
  17. Munro, Alistair & Sugden, Robert, 2003. "On the theory of reference-dependent preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 50(4), pages 407-428, April.
  18. Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, MIT Press, vol. 121(4), pages 1133-1165, November.
  19. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
  20. Robert Sugden, 2007. "The value of opportunities over time when preferences are unstable," Social Choice and Welfare, Springer, vol. 29(4), pages 665-682, December.
  21. Horowitz, John K. & McConnell, K. E., 2003. "Willingness to accept, willingness to pay and the income effect," Journal of Economic Behavior & Organization, Elsevier, vol. 51(4), pages 537-545, August.
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Citations

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Cited by:
  1. Christian Schubert, 2012. "Opportunity and Preference Learning," Papers on Economics and Evolution 2012-08, Max Planck Institute of Economics, Evolutionary Economics Group.
  2. Elisabeth Gsottbauer & Jeroen Bergh, 2011. "Environmental Policy Theory Given Bounded Rationality and Other-regarding Preferences," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 49(2), pages 263-304, June.
  3. Hammitt, James & Robinson, Lisa, 2010. "Behavioral Economics and the Conduct of Benefit-Cost Analysis: Towards Principles and Standards," LERNA Working Papers 11.02.336, LERNA, University of Toulouse.
  4. Norwood, F. Bailey & Lusk, Jayson L., 2011. "A calibrated auction-conjoint valuation method: Valuing pork and eggs produced under differing animal welfare conditions," Journal of Environmental Economics and Management, Elsevier, vol. 62(1), pages 80-94, July.
  5. Ben McQuillin & Robert Sugden, 2012. "Reconciling normative and behavioural economics: the problems to be solved," Social Choice and Welfare, Springer, vol. 38(4), pages 553-567, April.
  6. Christian Schubert & Andreas Chai, 2012. "Sustainable Consumption and Consumer Sovereignty," Papers on Economics and Evolution 2012-14, Max Planck Institute of Economics, Evolutionary Economics Group.
  7. Stéphan Marette & Jutta Roosen & Sandrine Blanchemanche, 2011. "The Combination of Lab and Field Experiments for Benefit-Cost Analysis," Journal of Benefit-Cost Analysis, De Gruyter, vol. 2(3), pages 2.
  8. Lindsey, Robin, 2011. "State-dependent congestion pricing with reference-dependent preferences," Transportation Research Part B: Methodological, Elsevier, vol. 45(10), pages 1501-1526.

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