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Comparing Willingness-to-Pay and Subjective Well-Being in the Context of Non-Market Goods

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  • Paul Dolan
  • Robert Metcalfe

Abstract

In order to value non-market goods, economists estimate individuals' willingness to pay (WTP) for these goods using revealed or stated preference methods. We compare these conventional approaches with subjective well-being (SWB), which is based on individuals' ratings of their happiness or life satisfaction rather than on their preferences. In the context of a quasi- experiment in urban regeneration, we find that monetary estimates from SWB data are significantly higher than from revealed and stated preference data. Stigma in revealed preferences, mental accounting in stated preferences and unspecified duration in SWB ratings might explain some of the difference between the valuation methods.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0890.

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Date of creation: Oct 2008
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Handle: RePEc:cep:cepdps:dp0890

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: willingness to pay; preferences; life satisfaction; subjective well-being; nonmarketgoods;

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Cited by:
  1. Néstor Gandelman & Giorgina Piani & Zuleika Ferre, 2012. "Neighborhood Determinants of Quality of Life," Journal of Happiness Studies, Springer, vol. 13(3), pages 547-563, June.
  2. Powdthavee, Nattavudh & Stutzer, Alois, 2014. "Economic Approaches to Understanding Change in Happiness," IZA Discussion Papers 8131, Institute for the Study of Labor (IZA).
  3. Stutzer, Alois & Frey, Bruno S., 2010. "Recent Advances in the Economics of Individual Subjective Well-Being," IZA Discussion Papers 4850, Institute for the Study of Labor (IZA).
  4. Bruno Frey & Alois Stutzer, 2012. "The use of happiness research for public policy," Social Choice and Welfare, Springer, vol. 38(4), pages 659-674, April.
  5. Angus Deaton & Jane Fortson & Robert Tortora, 2009. "Life (evaluation), HIV/AIDS, and Death in Africa," NBER Working Papers 14637, National Bureau of Economic Research, Inc.
  6. Romina Boarini & Margherita Comola & Femke Keulenaer & Robert Manchin & Conal Smith, 2013. "Can Governments Boost People’s Sense of Well-Being? The Impact of Selected Labour Market and Health Policies on Life Satisfaction," Social Indicators Research, Springer, vol. 114(1), pages 105-120, October.
  7. Bruno S. Frey & Simon Luechinger & Alois Stutzer, 2009. "The Life Satisfaction Approach to Environmental Valuation," Working papers 2009/07, Faculty of Business and Economics - University of Basel.
  8. Paul Dolan & Richard Layard & Robert Metcalfe, 2011. "Measuring subjective well-being for public policy," LSE Research Online Documents on Economics 35420, London School of Economics and Political Science, LSE Library.
  9. Daniel Fujiwara, 2013. "A general method for valuing non-market goods using wellbeing data: three-stage wellbeing valuation," LSE Research Online Documents on Economics 51577, London School of Economics and Political Science, LSE Library.
  10. Daniel J. Benjamin & Ori Heffetz & Miles S. Kimball & Alex Rees-Jones, 2013. "Can Marginal Rates of Substitution Be Inferred from Happiness Data? Evidence from Residency Choices," NBER Working Papers 18927, National Bureau of Economic Research, Inc.
  11. Paul Dolan & Richard Layard & Robert Metcalfe, 2011. "Measuring Subjective Wellbeing for Public Policy: Recommendations on Measures," CEP Special Papers 23, Centre for Economic Performance, LSE.
  12. Paul Dolan & Daniel Fujiwara & Robert Metcalfe, 2011. "A Step towards Valuing Utility the Marginal and Cardinal Way," CEP Discussion Papers dp1062, Centre for Economic Performance, LSE.
  13. Daniel Fujiwara, 2013. "A General Method for Valuing Non-Market Goods Using Wellbeing Data: Three-Stage Wellbeing Valuation," CEP Discussion Papers dp1233, Centre for Economic Performance, LSE.
  14. Stutzer, Alois & Frey, Bruno S., 2012. "Recent Developments in the Economics of Happiness: A Selective Overview," IZA Discussion Papers 7078, Institute for the Study of Labor (IZA).

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