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Accurate Valuation in the Absence of Markets

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Author Info

  • Florenz Plassmann

    (State University of New York at Binghamton)

  • T. Nicolaus Tideman

    (Virginia Polytechnic Institute and State University, Blacksburg)

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    Abstract

    Incomplete markets do not provide accurate information about people's subjective valuations of goods. Knowledge of these subjective valuations is often important, however, for example when compensation payments for damaged or destroyed property are required. We argue that in such cases, an attractive measure of the value of a good is the reservation price of the owner, who is generally the person who values it most highly. If a property is sufficiently unique so that there is no market price that can be used as an approximation, then the only way to learn this subjective reservation price is to have the owner self-assess his property. We describe a mechanism that provides an incentive for the owner to self-assess his property honestly without requiring that the property's value be objectively observable.

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    Bibliographic Info

    Article provided by in its journal Public Finance Review.

    Volume (Year): 36 (2008)
    Issue (Month): 3 (May)
    Pages: 334-358

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    Handle: RePEc:sae:pubfin:v:36:y:2008:i:3:p:334-358

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    Related research

    Keywords: value theory; self-assessment; eminent domain; land assembly; property taxation;

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    Cited by:
    1. Thomas Miceli, 2011. "Free riders, holdouts, and public use: a tale of two externalities," Public Choice, Springer, vol. 148(1), pages 105-117, July.

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