Willingness to pay for environmental quality: a theoretical problem and its implications

Alberto Pench

STUDI ECONOMICI, 2012, vol. 2012/108, issue 108, 113-119

Abstract: This paper demonstrates a case where theoretical measures of willingness to pay to secure a beneficial change in environmental quality (or in the available quantity of a public good) or to avoid an exactly opposite change are incorrect measure of maximum willingness to pay. The key requirement is that indifference curves are allowed to intersect the axis corresponding to environmental quality (or the public good with zero price) and the source of this theoretical flaw is that in spite of a zero marginal willingness to pay marginal utility for environmental quality (or for the public good) is strictly positive. In such cases the paper suggests that only correct measures are the corresponding willingness to accept for the opposite change.

JEL-codes: Q50 Q51 (search for similar items in EconPapers)
Date: 2012
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