We develop an approach to valuing non-market goods using nonparametric revealed preference analysis. We show how nonparametric methods can also be used to bound the welfare effects of changes in the provision of a non-market good. Our main context is one in which the non-market good affects the marginal utility of consuming a related market good. This can also be framed as a shift in the taste for, or quality of, the market good. A systematic approach for incorporating quality/taste variation into a revealed preference framework for heterogeneous consumers is developed. This enables the recovery of the minimal variation in quality required to rationalise observed choices of related market goods. The variation in quality appears as a adjustment to the price for related market goods which then allows a revealed preference approach to bounding compensation measures of welfare effects to be applied.
Authors
Laura Blow
CPP Co-Director
Richard is Co-Director of the Centre for the Microeconomic Analysis of Public Policy (CPP) and Senior Research Fellow at IFS.
Journal article details
- DOI
- 10.1007/s10640-018-0229-9
- Publisher
- Springer
- Issue
- Volume 69, Issue 3, March 2018, pages 503-527
Suggested citation
Blow, L and Blundell, R. (2018). 'A Nonparametric Revealed Preference Approach to Measuring the Value of Environmental Quality' 69(3/2018), pp.503–527.
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