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Can Weak Substitution be Rehabilitated?

  • V. Smith

    ()

  • Mary Evans
  • H. Banzhaf
  • Christine Poulos

This paper develops a graphical analysis and an analytical model that demonstrate how weak substitution can be used for non-market valuation. Both weak complementarity and weak substitution can be evaluated as restrictions that allow quantity or quality changes in non-market goods to be described as price changes that yield equivalent changes in individual well being. They are Hicksian equivalents in that the price changes yield the same utility changes as would the quantity or quality changes. After discussion of several potential applications of weak substitution, the paper develops the parallel between the restriction and recent strategies from modeling differentiated goods.

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File URL: http://hdl.handle.net/10.1007/s10640-009-9312-6
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Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 45 (2010)
Issue (Month): 2 (February)
Pages: 203-221

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Handle: RePEc:kap:enreec:v:45:y:2010:i:2:p:203-221
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  1. Timothy J. Bartik, 2008. "Evaluating the Benefits of Non-marginal Reductions in Pollution Using Information on Defensive Expenditures," Book chapters authored by Upjohn Institute researchers, in: Joseph Herriges & Catherine L. Kling (ed.), Revealed Preference Approaches to Environmental Valuation, volume 0, pages 459-475 W.E. Upjohn Institute for Employment Research.
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  8. Peter C. Reiss & Matthew W. White, 2006. "Evaluating Welfare with Nonlinear Prices," NBER Working Papers 12370, National Bureau of Economic Research, Inc.
  9. Bockstael, N E & McConnell, K E, 1993. "Public Goods as Characteristics of Non-market Commodities," Economic Journal, Royal Economic Society, vol. 103(420), pages 1244-57, September.
  10. Milton Friedman, 1949. "The Marshallian Demand Curve," Journal of Political Economy, University of Chicago Press, vol. 57, pages 463.
  11. Smith, V. Kerry & Banzhaf, H. Spencer, 2007. "Quality adjusted price indexes and the Willig condition," Economics Letters, Elsevier, vol. 94(1), pages 43-48, January.
  12. Palmquist, Raymond B., 2005. "Weak complementarity, path independence, and the intuition of the Willig condition," Journal of Environmental Economics and Management, Elsevier, vol. 49(1), pages 103-115, January.
  13. Vartia, Yrjo O, 1983. "Efficient Methods of Measuring Welfare Change and Compensated Income in Terms of Ordinary Demand Functions," Econometrica, Econometric Society, vol. 51(1), pages 79-98, January.
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  16. Hausman, Jerry A., 1979. "The econometrics of labor supply on convex budget sets," Economics Letters, Elsevier, vol. 3(2), pages 171-174.
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