Market simulation and the provision of public goods: A non-paternalistic response to anomalies in environmental evaluation
Most normative economics assumes that individuals have coherent preferences. This paper responds to growing evidence of failures of this assumption, particularly in the context of stated-preference methods widely used in environmental policy analysis. It proposes a non-paternalistic concept of consumer sovereignty that does not assume preference coherence, is satisfied by competitive markets, and can be applied to the provision of public goods. A key implication is that decisions should reflect valuations revealed 'at the point of consumption'. Such valuations, which can be inferred from hedonic prices, may be less susceptible to willingness-to-accept (WTA)/willingness-to-pay (WTP) disparities than those elicited by stated-preference methods.
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