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On Measuring the Value of a Nonmarket Good Using Market Data

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  • David S. Bullock
  • Nicholas Minot

Abstract

We use line integral theory to lay out in a more general theoretical framework the conditions under which it is possible to measure with market data the welfare effects of a change in a nonmarket good. We present in detail a numerical method of measuring the value of nonmarket goods using market data, under either weak neutrality or weak complementarity. Our numerical method is more flexible than the existing analytical method because it can be used with any well-behaved Marshallian demand function, and can be used even when the willig condition does not hold. Copyright 2006, Oxford University Press.

Suggested Citation

  • David S. Bullock & Nicholas Minot, 2006. "On Measuring the Value of a Nonmarket Good Using Market Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(4), pages 961-973.
  • Handle: RePEc:oup:ajagec:v:88:y:2006:i:4:p:961-973
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2006.00909.x
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    1. repec:clg:wpaper:2010-05 is not listed on IDEAS
    2. Nicolai V. Kuminoff & V. Kerry Smith & Christopher Timmins, 2013. "The New Economics of Equilibrium Sorting and Policy Evaluation Using Housing Markets," Journal of Economic Literature, American Economic Association, vol. 51(4), pages 1007-1062, December.
    3. Nicolai V. Kuminoff & V. Kerry Smith & Christopher Timmins, 2010. "The New Economics of Equilibrium Sorting and its Transformational Role for Policy Evaluation," NBER Working Papers 16349, National Bureau of Economic Research, Inc.
    4. Neill Jon R., 2012. "Implications of a Weaker Form of Complementarity," Journal of Benefit-Cost Analysis, De Gruyter, vol. 3(4), pages 1-10, December.
    5. David G. Brown, 2009. "A Revealed Preference Feasibility Condition for Weak Complementarity," Departmental Working Papers 2009-08, Department of Economics, Louisiana State University.
    6. Ebert, Udo, 2008. "Approximating WTP and WTA for environmental goods from marginal willingness to pay functions," Ecological Economics, Elsevier, vol. 66(2-3), pages 270-274, June.
    7. V. Smith & Mary Evans & H. Banzhaf & Christine Poulos, 2010. "Can Weak Substitution be Rehabilitated?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(2), pages 203-221, February.
    8. Aaron Strong & V. Kerry Smith, 2010. "Reconsidering the Economics of Demand Analysis with Kinked Budget Constraints," Land Economics, University of Wisconsin Press, vol. 86(1), pages 173-190.
    9. Bullock, David S. & Dadakas, Dimitrios & Katranidis, Stelios D., 2009. "Measuring the Effects of Technology Change in Multiple Markets : Application to the Greek Cotton Yarn Industry," MPRA Paper 67204, University Library of Munich, Germany, revised 2012.
    10. Jared C. Carbone & V. Kerry Smith, 2010. "Valuing ecosystem services in general equilibrium," NBER Working Papers 15844, National Bureau of Economic Research, Inc.
    11. David G. Brown, 2008. "Preference-Theoretic Weak Complementarity: Getting More with Less," Departmental Working Papers 2008-09, Department of Economics, Louisiana State University.
    12. von Haefen, Roger H., 2007. "Empirical strategies for incorporating weak complementarity into consumer demand models," Journal of Environmental Economics and Management, Elsevier, vol. 54(1), pages 15-31, July.
    13. Udo Ebert, 2010. "On the Measurement of Welfare for Market and Nonmarket Goods: A Numerical Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(1), pages 102-109.

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