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Behavioural Economics, Benefit-Cost Analysis, and the WTP versus WTA Choice

Author

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  • Knetsch, Jack L.

Abstract

Many of the findings from behavioural economics research offer useful opportunities to better understand and anticipate people's choices among alternatives and to improve policy design accordingly. Their use has, however, varied among fields — being widely employed in some and mainly ignored in others. Major issues and likely understatements resulting from current practice are illustrated in the recent assessment of the monetary value of damages resulting from the BP Deepwater Horizon oil spill.

Suggested Citation

  • Knetsch, Jack L., 2020. "Behavioural Economics, Benefit-Cost Analysis, and the WTP versus WTA Choice," International Review of Environmental and Resource Economics, now publishers, vol. 14(2-3), pages 153-196, October.
    • Handle: RePEc:now:jirere:101.00000119
    DOI: 10.1561/101.00000119
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    Citations

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    Cited by:

    1. Zerbe, Richard, 2023. "A foundation for benefit-cost analysis," MPRA Paper 121294, University Library of Munich, Germany, revised Jun 2024.
    2. Brown, Zachary Steven, 2022. "Distributional policy impacts, WTP-WTA disparities, and the Kaldor-Hicks tests in benefit-cost analysis," Journal of Environmental Economics and Management, Elsevier, vol. 113(C).
    3. Kiet T. Nguyen & Jack L. Knetsch & Phumsith Mahasuweerachai, 2021. "WTP or WTA: A Means of Determining the Appropriate Welfare Measure of Positive and Negative Changes When Preferences are Reference Dependent," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 78(4), pages 615-633, April.
    4. Huber, Robert & Späti, Karin & Finger, Robert, 2023. "A behavioural agent-based modelling approach for the ex-ante assessment of policies supporting precision agriculture," Ecological Economics, Elsevier, vol. 212(C).

    More about this item

    Keywords

    Choice of welfare measure; willingness-to-accept; willingness-to-pay; benefit-cost analysis; assessment of losses;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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