Willingness to Pay for Environmental Quality: a Theoretical Problem and Its Implications

Journal title STUDI ECONOMICI
Author/s Alberto Pench
Publishing Year 2013 Issue 2012/108 Language Italian
Pages 7 P. 113-119 File size 253 KB
DOI 10.3280/STE2012-108003
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This paper demonstrates a case where theoretical measures of willingness to pay to secure a beneficial change in environmental quality (or in the available quantity of a public good) or to avoid an exactly opposite change are incorrect measure of maximum willingness to pay. The key requirement is that indifference curves are allowed to intersect the axis corresponding to environmental quality (or the public good with zero price) and the source of this theoretical flaw is that in spite of a zero marginal willingness to pay marginal utility for environmental quality (or for the public good) is strictly positive. In such cases the paper suggests that only correct measures are the corresponding willingness to accept for the opposite change.

Keywords: Environmental quality, willingness to pay, willingness to accept, marginal cost of utility

Jel codes: Q50, Q51

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Alberto Pench, Willingness to pay for environmental quality: a theoretical problem and its implications in "STUDI ECONOMICI " 108/2012, pp 113-119, DOI: 10.3280/STE2012-108003