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Wealth Effects and the Valuation of Common Access Facilities: Some Calculations

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  • JONATHAN C. BALDRY

Abstract

Using a CES utility function modified to allow for zero usage of one commodity, this paper calculates the relative difference between compensating and equivalent variation measures of the welfare loss due to withdrawal of a commodity, for various plausible values of the relevant demand function parameters (income elasticity, expenditure share and substitution elasticity). Contrary to what is frequently asserted these differences can be quite significant

Suggested Citation

  • Jonathan C. Baldry, 1988. "Wealth Effects and the Valuation of Common Access Facilities: Some Calculations," The Economic Record, The Economic Society of Australia, vol. 64(2), pages 128-132, June.
    • Handle: RePEc:bla:ecorec:v:64:y:1988:i:2:p:128-132
    DOI: 10.1111/j.1475-4932.1988.tb02048.x
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    References listed on IDEAS

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    1. Jack L. Knetsch & J. A. Sinden, 1984. "Willingness to Pay and Compensation Demanded: Experimental Evidence of an Unexpected Disparity in Measures of Value," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(3), pages 507-521.
    2. Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-597, September.
    3. Rowe, Robert D. & D'Arge, Ralph C. & Brookshire, David S., 1980. "An experiment on the economic value of visibility," Journal of Environmental Economics and Management, Elsevier, vol. 7(1), pages 1-19, March.
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