Journal Article

Evaluation of Nonmarket Goods: Recovering Unconditional Preferences

Udo Ebert

in American Journal of Agricultural Economics

Published on behalf of Agricultural and Applied Economics Association

Volume 80, issue 2, pages 241-254
Published in print May 1998 | ISSN: 0002-9092
Published online May 1998 | e-ISSN: 1467-8276 | DOI: http://dx.doi.org/10.2307/1244497
Evaluation of Nonmarket Goods: Recovering Unconditional Preferences

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  • Household Behaviour and Family Economics
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A new approach is proposed for the evaluation of nonmarket goods, starting from a complete or incomplete (conditional) demand system for market goods which is observable and depends on nonmarket goods. This information is not sufficient to recover the underlying preference ordering of the representative consumer. The central idea is to employ additional marginal willingness to pay functions for the nonmarket goods. Since they can be estimated either together with the demand system or in a separate step they are less arbitrary than the assumptions or hypotheses usually made. If the entire system is (weakly) integrable the underlying ordering and appropriate welfare measures can be derived. In this article I investigate the relationship between conditional and unconditional demand systems, present sufficient conditions for (weak) integrability, and demonstrate the practicability of the procedure proposed by means of three examples.

Keywords: conditional and unconditional demand system; evaluation of nonmarket goods; (in)complete demand system; integrability; welfare measurement; D110; D610

Journal Article.  0 words. 

Subjects: Household Behaviour and Family Economics ; Welfare Economics

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