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Can Weak Substitution be Rehabilitated?

Author

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  • V. Kerry Smith
  • Mary F. Evans
  • H. Spencer Banzhaf
  • Christine Poulos

Abstract

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.

Suggested Citation

  • V. Kerry Smith & Mary F. Evans & H. Spencer Banzhaf & Christine Poulos, 2008. "Can Weak Substitution be Rehabilitated?," NBER Working Papers 13903, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:13903
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    References listed on IDEAS

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    1. 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.
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    3. Holger Sieg & V. Kerry Smith & H. Spencer Banzhaf & Randy Walsh, 2004. "Estimating The General Equilibrium Benefits Of Large Changes In Spatially Delineated Public Goods," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1047-1077, November.
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    15. Larson, Douglas M., 1991. "Recovering weakly complementary preferences," Journal of Environmental Economics and Management, Elsevier, vol. 21(2), pages 97-108, September.
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    Cited by:

    1. Laura Blow & Richard Blundell, 2018. "A Nonparametric Revealed Preference Approach to Measuring the Value of Environmental Quality," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(3), pages 503-527, March.
    2. Sloggy, Matthew R. & Manning, Dale, 2020. "Natural Insurance and Weak Substitutability: Using Insurance Markets to Value Groundwater Stocks in Kansas," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304575, Agricultural and Applied Economics Association.

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    More about this item

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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