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Environmental Valuation with Imperfect Information The Case of the Random Utility Model

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  • Christopher Leggett

Abstract

This paper considers welfare analysis with therandom utility model (RUM) when perceptions ofenvironmental quality differ from objectivemeasures of environmental quality. Environmental quality is assumed to be anexperience good, so that while perceptions ofquality determine choices, ex postutility is determined by objective quality. Given this assumption, I derive a measure ofthe welfare impact of changes in environmentalquality, and I show how this new welfaremeasure differs from the traditional welfaremeasure developed by Hanemann (1982). This newwelfare measure provides an approach tomeasuring the value of information aboutenvironmental quality within the framework ofthe random utility model. Copyright Kluwer Academic Publishers 2002

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  • Christopher Leggett, 2002. "Environmental Valuation with Imperfect Information The Case of the Random Utility Model," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 23(3), pages 343-355, November.
    • Handle: RePEc:kap:enreec:v:23:y:2002:i:3:p:343-355
    DOI: 10.1023/A:1021289010879
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    References listed on IDEAS

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    1. Small, Kenneth A & Rosen, Harvey S, 1981. "Applied Welfare Economics with Discrete Choice Models," Econometrica, Econometric Society, vol. 49(1), pages 105-130, January.
    2. Adamowicz, Wiktor & Swait, Joffre & Boxall, Peter & Louviere, Jordan & Williams, Michael, 1997. "Perceptions versus Objective Measures of Environmental Quality in Combined Revealed and Stated Preference Models of Environmental Valuation," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 65-84, January.
    3. Foster, William & Just, Richard E., 1989. "Measuring welfare effects of product contamination with consumer uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 266-283, November.
    4. Joseph A. Herriges & Catherine L. Kling (ed.), 1999. "Valuing Recreation and the Environment," Books, Edward Elgar Publishing, number 1315.
    5. Hanemann, W. Michael, 1982. "Applied Welfare Analysis with Qualitative Response Models," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7982f0k8, Department of Agricultural & Resource Economics, UC Berkeley.
    6. Nicolaas W. Bouwes & Robert Schneider, 1979. "Procedures in Estimating Benefits of Water Quality Change," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 61(3), pages 535-539.
    7. P. Joan Poor & Kevin J. Boyle & Laura O. Taylor & Roy Bouchard, 2001. "Objective versus Subjective Measures of Water Clarity in Hedonic Property Value Models," Land Economics, University of Wisconsin Press, vol. 77(4), pages 482-493.
    8. Hanemann, W. Michael, 1982. "Applied Welfare Analysis with Qualitative Response Models," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7982f0k8, Department of Agricultural & Resource Economics, UC Berkeley.
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    Cited by:

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    2. Jonathan D. Ketcham & Nicolai V. Kuminoff & Christopher A. Powers, 2016. "Estimating the Heterogeneous Welfare Effects of Choice Architecture: An Application to the Medicare Prescription Drug Insurance Market," NBER Working Papers 22732, National Bureau of Economic Research, Inc.
    3. Jie Bai, 2016. "Melons as Lemons: Asymmetric Information, Consumer Learning and Seller Reputation," Natural Field Experiments 00540, The Field Experiments Website.
    4. Martin J. Osborne & Matthew A. Turner, 2010. "Cost Benefit Analyses versus Referenda," Journal of Political Economy, University of Chicago Press, vol. 118(1), pages 156-187, February.
    5. Mann, Stefan, 2003. "Die Expertenbewertung als Alternative zur Kontingenzbewertung," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 52(08), pages 1-8.
    6. Bockstael, Nancy E. & Freeman III, A. Myrick, 2006. "Welfare Theory and Valuation," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 12, pages 517-570, Elsevier.

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