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How Can Behavioral Economics Inform Nonmarket Valuation? An Example from the Preference Reversal Literature

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  • Jonathan E. Alevy
  • John A. List
  • Wiktor L. Adamowicz

Abstract

Psychological insights have made inroads within most areas of study in economics. One area where less advance has occurred is environmental and resource economics. In this study, we examine preference reversals over evaluation modes, in which economic values critically depend on whether a good is valued jointly with others, or in isolation. The question arises because two methods for eliciting stated preferences differ in that one presents objects together and another presents them in isolation. Our empirical evidence demonstrates the import of behavioral economics and sheds new light on the possible insensitivity of valuations to the scope of the good.

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Bibliographic Info

Article provided by University of Wisconsin Press in its journal Land Economics.

Volume (Year): 87 (2011)
Issue (Month): 3 ()
Pages: 365-381

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Handle: RePEc:uwp:landec:v:87:y:2011:iii:1:p:365-381

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  1. Adamowicz, Wiktor L. & Boxall, Peter C. & Williams, Michael & Louviere, Jordan, 1995. "Stated Preference Approaches for Measuring Passive Use Values: Choice Experiments versus Contingent Valuation," Staff Paper Series, University of Alberta, Department of Resource Economics and Environmental Sociology 24126, University of Alberta, Department of Resource Economics and Environmental Sociology.
  2. Shogren, Jason F. & Margolis, Michael & Koo, Cannon & List, John A., 2001. "A random nth-price auction," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 46(4), pages 409-421, December.
  3. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, American Finance Association, vol. 16(1), pages 8-37, 03.
  4. Slovic, Paul & Finucane, Melissa L. & Peters, Ellen & MacGregor, Donald G., 2007. "The affect heuristic," European Journal of Operational Research, Elsevier, Elsevier, vol. 177(3), pages 1333-1352, March.
  5. Richard Carson & Nicholas Flores & Norman Meade, 2001. "Contingent Valuation: Controversies and Evidence," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 19(2), pages 173-210, June.
  6. Heberlein, Thomas A. & Wilson, Matthew A. & Bishop, Richard C. & Schaeffer, Nora Cate, 2005. "Rethinking the scope test as a criterion for validity in contingent valuation," Journal of Environmental Economics and Management, Elsevier, vol. 50(1), pages 1-22, July.
  7. Bazerman, Max H. & Moore, Don A. & Tenbrunsel, Ann E. & Wade-Benzoni, Kimberly A. & Blount, Sally, 1999. "Explaining how preferences change across joint versus separate evaluation," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 39(1), pages 41-58, May.
  8. John A. List, 2002. "Preference Reversals of a Different Kind: The "More Is Less" Phenomenon," American Economic Review, American Economic Association, American Economic Association, vol. 92(5), pages 1636-1643, December.
  9. John List, 2003. "Does market experience eliminate market anomalies?," Natural Field Experiments, The Field Experiments Website 00297, The Field Experiments Website.
  10. Wiktor Adamowicz & Peter Boxall & Michael Williams & Jordan Louviere, 1998. "Stated Preference Approaches for Measuring Passive Use Values: Choice Experiments and Contingent Valuation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 80(1), pages 64-75.
  11. Magat, Wesley A. & Kip Viscusi, W. & Huber, Joel, 1988. "Paired comparison and contingent valuation approaches to morbidity risk valuation," Journal of Environmental Economics and Management, Elsevier, vol. 15(4), pages 395-411, December.
  12. Louviere,Jordan J. & Hensher,David A. & Swait,Joffre D., 2000. "Stated Choice Methods," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521788304.
  13. Boxall, Peter C. & Adamowicz, Wiktor L. & Swait, Joffre & Williams, Michael & Louviere, Jordan, 1996. "A comparison of stated preference methods for environmental valuation," Ecological Economics, Elsevier, Elsevier, vol. 18(3), pages 243-253, September.
  14. Grether, David M. & Plott, Charles R., . "Economic Theory of Choice and the Preference Reversal Phenomenon," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 152, California Institute of Technology, Division of the Humanities and Social Sciences.
  15. Kahneman, Daniel & Knetsch, Jack L., 1992. "Valuing public goods: The purchase of moral satisfaction," Journal of Environmental Economics and Management, Elsevier, vol. 22(1), pages 57-70, January.
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Cited by:
  1. Stachtiaris, Spiros & Drichoutis, Andreas C. & Klonaris, Stathis, 2011. "The "more is less" phenomenon in Contingent and Inferred valuation," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland, European Association of Agricultural Economists 116013, European Association of Agricultural Economists.

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