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Accurate Valuation in the Absence of Markets

Author

Listed:
  • Florenz Plassmann

    (State University of New York at Binghamton)

  • T. Nicolaus Tideman

    (Virginia Polytechnic Institute and State University, Blacksburg)

Abstract

Incomplete markets do not provide accurate information about people's subjective valuations of goods. Knowledge of these subjective valuations is often important, however, for example when compensation payments for damaged or destroyed property are required. We argue that in such cases, an attractive measure of the value of a good is the reservation price of the owner, who is generally the person who values it most highly. If a property is sufficiently unique so that there is no market price that can be used as an approximation, then the only way to learn this subjective reservation price is to have the owner self-assess his property. We describe a mechanism that provides an incentive for the owner to self-assess his property honestly without requiring that the property's value be objectively observable.

Suggested Citation

  • Florenz Plassmann & T. Nicolaus Tideman, 2008. "Accurate Valuation in the Absence of Markets," Public Finance Review, , vol. 36(3), pages 334-358, May.
    • Handle: RePEc:sae:pubfin:v:36:y:2008:i:3:p:334-358
    DOI: 10.1177/1091142107299256
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    References listed on IDEAS

    as
    1. T. Nicolaus Tideman & Florenz Plassmann, 2005. "Fair and Efficient Compensation for Taking Property under Uncertainty," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(3), pages 471-495, August.
    2. Niou, Emerson M S & Tan, Guofu, 1994. "An Analysis of Dr. Sun Yat-sen's Self-Assessment Scheme for Land Taxation," Public Choice, Springer, vol. 78(1), pages 103-114, January.
    3. Tideman, T Nicolaus & Tullock, Gordon, 1976. "A New and Superior Process for Making Social Choices," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1145-1159, December.
    4. Richard Bird, 1984. "Put up or shut up: Self-assessment and asymmetric information," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 3(4), pages 618-620.
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    Cited by:

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    2. Thomas J. Miceli, 2014. "The Cost of Kelo: Are Property Taxes a Form of Public Use?," Working papers 2014-35, University of Connecticut, Department of Economics.

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