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Nonmarket Valuation by Contests Under Two American Rules: A Game-Theoretic Analysis

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  • Sung-Hoon Park

    (Department of Economics, Chosun University, Chosundae-5gil 76, Dong-gu, Gwangju 61452, Republic of Korea)

  • Jason F. Shogren

    (Department of Economics, University of Wyoming, Laramie, WY 82071, USA)

Abstract

Herein, we further examine how we can value nonmarket goods and services by considering the costs associated with environmental conflicts. Focusing on two American rules—the asymmetric reimbursement system and the contingent fee contract—we develop a strategic game-theoretic model in which a citizens group engages a delegate through a contingent fee compensation contract, while a polluter engages a delegate through an hourly fee compensation contract. If the citizens group prevails, the polluter is obligated to contribute a portion of the contingent fee. Solving for the subgame perfect equilibrium, two results emerge. First, the 4x-rule can be maintained through the adjustment of the asymmetric reimbursement system. Second, the asymmetric reimbursement system can serve both as a supplementary method to measure nonmarket valuation and to reduce the rent dissipation resulting from environmental conflicts under general circumstances.

Suggested Citation

  • Sung-Hoon Park & Jason F. Shogren, 2025. "Nonmarket Valuation by Contests Under Two American Rules: A Game-Theoretic Analysis," Games, MDPI, vol. 16(4), pages 1-13, June.
  • Handle: RePEc:gam:jgames:v:16:y:2025:i:4:p:33-:d:1690771
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    References listed on IDEAS

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    1. Lee, Sanghack & Hyeong Kang, J., 1998. "Collective contests with externalities," European Journal of Political Economy, Elsevier, vol. 14(4), pages 727-738, November.
    2. Kyung Hwan Baik & In‐Gyu Kim, 2007. "Strategic Decisions On Lawyers’ Compensation In Civil Disputes," Economic Inquiry, Western Economic Association International, vol. 45(4), pages 854-863, October.
    3. Emons, Winand, 2000. "Expertise, contingent fees, and insufficient attorney effort," International Review of Law and Economics, Elsevier, vol. 20(1), pages 21-33, March.
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