What's the Use? Welfare Estimates from Revealed Preference Models When Weak Complementarity Does Not Hold

Joseph Herriges, Catherine Kling and Daniel Phaneuf

Center for Agricultural and Rural Development (CARD) Publications from Center for Agricultural and Rural Development (CARD) at Iowa State University

Abstract: The focal point of the revealed preference (RP) valuation literature, including recreation demand and random utility maximization (RUM) models, has been on eliciting the "use" value associated with environmental amenities, i.e., that portion of value associated with direct use of a resource. Mäler's (1974) concept of weak complementarity is typically invoked to justify this focus. Indeed, weak complementarity explicitly or implicitly underlies most of the RP literature. This paper considers the measurement of welfare in RP models when weak complementarity does not hold. In particular, the Kuhn-Tucker (KT) framework (e.g., Phaneuf et al. 2000) does not impose weak complementarity a priori, raising the possibility of rejecting weak complementarity in estimation and the question as to what is the proper welfare measure to report. Although existence value cannot be measured, the authors argue that in some circumstances there are components of total value outside of use value which RP methods may help to illuminate.

Date: 2000-11
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Related works:
Journal Article: What's the use? welfare estimates from revealed preference models when weak complementarity does not hold (2004)
Working Paper: What's the Use? Welfare Estimates from Revealed Preference Models when Weak Complementarity Does Not Hold (2004)
Working Paper: What's the Use? Welfare Estimates from Revealed Preference Models When Weak Complementarity Does Not Hold (2004)
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