Title

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

Campus Units

Economics, Center for Agricultural and Rural Development

Document Type

Article

Publication Version

Submitted Manuscript

Publication Date

2004

Journal or Book Title

Journal of Environmental Economics and Management

Volume

47

Issue

1

First Page or Article ID Number

55

Last Page

70

DOI

10.1016/S0095-0696(03)00058-5

Abstract

In this paper we consider the theoretical and empirical ramifications of welfare measurement in revealed preference models when weak complementarity does not hold. In the context of a Kuhn–Tucker model of recreation demand we show that, while it is possible to estimate preferences that do not appear to exhibit weak complementarity, the calculation of welfare measurements from these models requires a cardinal interpretation of preferences that cannot be tested. Furthermore, we reiterate the under-appreciated fact that even traditional use value estimates require a cardinal restriction on preferences that, while often intuitive, also cannot be tested. We demonstrate empirically that the choice of restrictions can have significant ramifications, as use value estimates can vary based on the assumed preference structure.

Comments

This is a working paper of an article from Journal of Environmental Economics and Management 47 (2004): 55, doi:10.1016/S0095-0696(03)00058-5.