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Contingent Valuation: Is Some Number Better than No Number?

  • Peter A. Diamond
  • Jerry A. Hausman

Without market outcomes for comparison, internal consistency tests, particularly adding-up tests, are needed for credibility. When tested, contingent valuation has failed. Proponents find surveys tested poorly done. To the authors' knowledge, no survey has passed these tests. The 'embedding effect' is the similarity of willingness-to-pay responses that theory suggests (and sometimes requires) be different. This problem has long been recognized but not solved. The authors conclude that current methods are not suitable for damage assessment or benefit-cost analysis. They believe the problems come from an absence of preferences, not a flaw in survey methodology, making improvement unlikely.

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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 8 (1994)
Issue (Month): 4 (Fall)
Pages: 45-64

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Handle: RePEc:aea:jecper:v:8:y:1994:i:4:p:45-64
Note: DOI: 10.1257/jep.8.4.45
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  1. 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.
  2. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-58, December.
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