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Environmental Valuation with Imperfect Information The Case of the Random Utility Model

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  • Christopher Leggett

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    Abstract

    This paper considers welfare analysis with therandom utility model (RUM) when perceptions ofenvironmental quality differ from objectivemeasures of environmental quality. Environmental quality is assumed to be anexperience good, so that while perceptions ofquality determine choices, ex postutility is determined by objective quality. Given this assumption, I derive a measure ofthe welfare impact of changes in environmentalquality, and I show how this new welfaremeasure differs from the traditional welfaremeasure developed by Hanemann (1982). This newwelfare measure provides an approach tomeasuring the value of information aboutenvironmental quality within the framework ofthe random utility model. Copyright Kluwer Academic Publishers 2002

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    File URL: http://hdl.handle.net/10.1023/A:1021289010879
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    Bibliographic Info

    Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

    Volume (Year): 23 (2002)
    Issue (Month): 3 (November)
    Pages: 343-355

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    Handle: RePEc:kap:enreec:v:23:y:2002:i:3:p:343-355

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    Web page: http://www.springerlink.com/link.asp?id=100263

    Related research

    Keywords: discrete choice; information; logit; perception; random utility model; welfare analysis;

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    1. Hanemann, W. Michael, 1982. "Applied Welfare Analysis with Qualitative Response Models," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7982f0k8, Department of Agricultural & Resource Economics, UC Berkeley.
    2. Small, Kenneth A & Rosen, Harvey S, 1981. "Applied Welfare Economics with Discrete Choice Models," Econometrica, Econometric Society, vol. 49(1), pages 105-30, January.
    3. Adamowicz, Wiktor & Swait, Joffre & Boxall, Peter & Louviere, Jordan & Williams, Michael, 1997. "Perceptions versus Objective Measures of Environmental Quality in Combined Revealed and Stated Preference Models of Environmental Valuation," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 65-84, January.
    4. Foster, William & Just, Richard E., 1989. "Measuring welfare effects of product contamination with consumer uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 266-283, November.
    5. P. Joan Poor & Kevin J. Boyle & Laura O. Taylor & Roy Bouchard, 2001. "Objective versus Subjective Measures of Water Clarity in Hedonic Property Value Models," Land Economics, University of Wisconsin Press, vol. 77(4), pages 482-493.
    6. Bockstael, Nancy E. & McConnell, Kenneth E. & Strand, Ivar E., Jr., 1989. "Measuring the Benefits of Improvements in Water Quality: The Chesapeake Bay," Marine Resource Economics, Marine Resources Foundation, vol. 6(1).
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    Cited by:
    1. Martin J. Osborne & Matthew A. Turner, 2010. "Cost Benefit Analyses versus Referenda," Journal of Political Economy, University of Chicago Press, vol. 118(1), pages 156-187, 02.
    2. Mann, Stefan, 2003. "Die Expertenbewertung als Alternative zur Kontingenzbewertung," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 52(8).
    3. Bockstael, Nancy E. & Freeman III, A. Myrick, 2006. "Welfare Theory and Valuation," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 12, pages 517-570 Elsevier.

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