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Lexicographic Preferences in Contingent Valuation: A Theoretical Framework with Illustrations

  • Mika Rekola
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    This paper considers some implications of L*-ordering, an incommensurable preference model proposed in earlier CVliterature. The structure and existence of inverse demand functions is shown to be a function of three elements, the relationship between goods and wants, WTA/ WTP formats and the endowment of the good. In a many-to-many relationship uncompensated and even compensated inverse demand functions may exist, whereas a one-to-one relationship, implicitly assumed in earlier literature, does not necessarily produce either. An illustration is provided in support of the theoretical framework, especially the hypothesis that one-to-one relationship and high share of CV responses revealing lexicographic preferences are correlated.

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    Article provided by University of Wisconsin Press in its journal Land Economics.

    Volume (Year): 79 (2003)
    Issue (Month): 2 ()
    Pages: 277-291

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    Handle: RePEc:uwp:landec:v:79:y:2003:i:2:p:277-291
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    1. Hayakawa, Hiroaki, 1978. "Lexicographic preferences and consumer theory," Journal of Behavioral Economics, Elsevier, vol. 7(1), pages 17-51.
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    4. Hanemann, W Michael, 1991. "Willingness to Pay and Willingness to Accept: How Much Can They Differ?," American Economic Review, American Economic Association, vol. 81(3), pages 635-47, June.
    5. Marisa J. Mazzotta & James J. Opaluch, 1995. "Decision Making When Choices Are Complex: A Test of Heiner's Hypothesis," Land Economics, University of Wisconsin Press, vol. 71(4), pages 500-515.
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    7. Edwards, Steven F., 1986. "Ethical Preferences And The Assessment Of Existence Values: Does The Neoclassical Model Fit?," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 15(2), October.
    8. Ready Richard C. & Whitehead John C. & Blomquist Glenn C., 1995. "Contingent Valuation When Respondents Are Ambivalent," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 181-196, September.
    9. van den Bergh, Jeroen C. J. M. & Ferrer-i-Carbonell, Ada & Munda, Giuseppe, 2000. "Alternative models of individual behaviour and implications for environmental policy," Ecological Economics, Elsevier, vol. 32(1), pages 43-61, January.
    10. Peter C. Fishburn, 1974. "Exceptional Paper--Lexicographic Orders, Utilities and Decision Rules: A Survey," Management Science, INFORMS, vol. 20(11), pages 1442-1471, July.
    11. Yutaka Nakamura, 1997. "Lexicographic Additivity For Multi-Attribute Preferences On Finite Sets," Theory and Decision, Springer, vol. 42(1), pages 1-19, January.
    12. Anonymous, 1997. "The Forecasting and Policy System: an introduction," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 60, September.
    13. M. Common & I. Reid & R. Blamey, 1997. "Do existence values for cost benefit analysis exist?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 9(2), pages 225-238, March.
    14. Nick Hanley & Jennifer Milne, . "Ethical Beliefs and Behaviour in Contingent Valuation," Working Papers Series e96/1, University of Stirling, Division of Economics.
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