Nonmarket Valuation by Contests Under Two American Rules: A Game-Theoretic Analysis

Sung-Hoon Park and Jason Shogren
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Sung-Hoon Park: Department of Economics, Chosun University, Chosundae-5gil 76, Dong-gu, Gwangju 61452, Republic of Korea

Games, 2025, vol. 16, issue 4, 1-13

Abstract: Herein, we further examine how we can value nonmarket goods and services by considering the costs associated with environmental conflicts. Focusing on two American rules—the asymmetric reimbursement system and the contingent fee contract—we develop a strategic game-theoretic model in which a citizens group engages a delegate through a contingent fee compensation contract, while a polluter engages a delegate through an hourly fee compensation contract. If the citizens group prevails, the polluter is obligated to contribute a portion of the contingent fee. Solving for the subgame perfect equilibrium, two results emerge. First, the 4x-rule can be maintained through the adjustment of the asymmetric reimbursement system. Second, the asymmetric reimbursement system can serve both as a supplementary method to measure nonmarket valuation and to reduce the rent dissipation resulting from environmental conflicts under general circumstances.

Keywords: asymmetric reimbursement; contingent fee; environmental conflict; nonmarket valuation; rent dissipation (search for similar items in EconPapers)
JEL-codes: C C7 C70 C71 C72 C73 (search for similar items in EconPapers)
Date: 2025
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