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Willingness-to-pay and the equivalence approach

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  • Marc Fleurbaey

Abstract

This paper describes the evaluation of individual situations in terms of equivalent incomes (or money-metric utilities) computed from ordinary income by adding or subtracting various terms of willingness-to-pay. It discusses the origin of the approach and its connection with social choice theory, fair allocation theory, and philosophical principles. It shows how this has been generalized into a broader “equivalence approach”, and argues that the criticisms that have been raised against this methodology are not compelling. It also examines the challenges to be addressed for empirical applications of the approach.

Suggested Citation

  • Marc Fleurbaey, 2011. "Willingness-to-pay and the equivalence approach," Revue d'économie politique, Dalloz, vol. 121(1), pages 35-58.
  • Handle: RePEc:cai:repdal:redp_211_0035
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    Cited by:

    1. Marc Fleurbaey & Stéphane Luchini & Erik Schokkaert & Carine Van de Voorde, 2012. "Évaluation des politiques de santé : pour une prise en compte équitable des intérêts des populations," Économie et Statistique, Programme National Persée, vol. 455(1), pages 11-36.
    2. John A. Weymark, 2017. "Conundrums for nonconsequentialists," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 48(2), pages 269-294, February.
    3. Lin Yang, 2017. "Measuring individual well-being: A multidimensional index integrating subjective well-being and preferences," CASE Papers /202, Centre for Analysis of Social Exclusion, LSE.

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