Cost-Benefit Analysis Under Uncertainty

Graham, D. A.

doi:10.3386/w0194

Cited by 128 publications

(119 citation statements)

References 6 publications

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“…With conditions of uncertainty, there is still some debate about how BCA should proceed (Graham, 1981(Graham, , 1992Ready, 1993Ready, , 1995Chavas and Mullarkey, 2002). However, it is seems there is growing consensus that, using the definitions of Hammond (1981), it is appropriate to use an ex ante measure, i.e., based on individual's willingness to pay in an uncertain world, as opposed to an expected ex post measure in welfare analysis, or at least BCA.…”

Section: Non-eu Analysis In Resource Economics: the Theory We Usementioning

confidence: 99%

“…The resulting ex ante welfare measures in these studies takes a form that is different than the usual option price equation that would be derived in the linear-in-probabilities form of Graham (1981). If nonlinear probabilities or ambiguity aversion affects individuals' preferences, then these alternative forms should be recognized in the valuation models that are employed.…”

Section: Valuationmentioning

confidence: 99%

“…For example, Graham adopted the EU framework for his classic derivation of a welfare measure under uncertainty, the option price (Graham, 1981; see discussion in Ready, 1995). Typical environmental and resource economists interested in welfare changes, non-market valuation, or Pareto Optimality, might know little more than this about risk and uncertainty.…”

Section: Introductionmentioning

confidence: 99%

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Why environmental and resource economists should care about non-expected utility models

Shaw

Woodward

2008

Resource and Energy Economics

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Experimental and theoretical analysis has shown that the conventional expected utility (EU) and subjective expected utility (SEU) models, which are linear in probabilities, have serious limitations in certain situations. We argue here that these limitations are often highly relevant to the work that environmental and natural resource economists do. We discuss some of the experimental evidence and alternatives to the SEU. We consider the theory used, the problems studied, and the methods employed by resource economists. Finally, we highlight some recent work that has begun to use some of the alternatives to the EU and SEU frameworks and discuss areas where much future work is needed. #

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Section: Non-eu Analysis In Resource Economics: the Theory We Usementioning

confidence: 99%

Section: Valuationmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Why environmental and resource economists should care about non-expected utility models

Shaw

Woodward

2008

Resource and Energy Economics

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“…21 In some instances, the matching question may be an integer/count, as in the case of a contingent behavior question (Englin and Cameron 2002) that asks for how may recreation trips are likely to be taken under a particular set of conditions. 22 In a more general sense, the introduction of uncertainty can change the nature of the welfare measure obtained (Graham 1981). A DQ variant that exploits uncertainty in a different way is the BDM procedure (Becker et al 1964) whereby the agent gives a matching response but whose obligation is related to the outcome of a random device.…”

Section: Matching Questionsmentioning

confidence: 99%

A Common Nomenclature for Stated Preference Elicitation Approaches

Carson

Louviere

2011

Environ Resource Econ

218

143

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It is often difficult to determine what actually was done in work involving data collected with stated preference surveys because the terms used to describe various procedures have ambiguous and sometimes conflicting meanings. Further, terms used to describe data collection procedures often are confounded with terms used to describe statistical techniques. We call for the use of a common nomenclature to describe what was done in a data collection effort for stated preference studies, and take a first step at setting out such nomenclature. We only seek to improve clarity in the communication of research results and take no position here on appropriateness of particular procedures.

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“…In principle, this modification is not difficult: one simply redefines (1) as in the book by Hirshleifer [1970] to include time-statedependent claims rather than just state-dependent claims. Even in the absence of complete contingent claims markets which allow the individual to arbitrage away any differences between his impatience and the after-tax market rate of interest, one might, as in the paper by Graham [1981], adjust the riskless rate to reflect this absence. In either case, custom first demands separate estimation of the relevant surplus (value) measure in each period and then application of the appropriate discounting formulae to the resulting stream of instantaneous consumer surpluses.…”

Section: Probability Issuesmentioning

confidence: 99%