Coping with preference anomalies in cost-benefit analysis

Arbeitspapier

Economics conventionally assumes that preferences are coherent, i.e. stable, context-independent, and consistent with axioms of rationality. Since these assumptions underpin standard interpretations of cost-benefit analysis (CBA), preference 'anomalies' found in stated preference surveys pose severe problems. This paper proposes an alternative interpretation of CBA as the simulation of the workings of competitive markets in situations in which, in reality, there is market failure. The object of a CBA of a project is to measure the surplus that is created by that project. It is shown that surplus can be defined without assuming that individuals have coherent preferences. Some of the ways in which this approach to CBA can overcome problems caused by preference anomalies are discussed.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CSERGE Working Paper EDM ; No. 03-03

Classification and Topics

• Classification: Wirtschaft
• Subject: anomalies ; cost-benefit analysis ; surplus ; willingness to pay ; Kosten-Nutzen-Analyse ; Willingness to pay ; Präferenztheorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Sugden, Robert
• Event: Veröffentlichung
• (who): University of East Anglia, The Centre for Social and Economic Research on the Global Environment (CSERGE)
• (where): Norwich
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/80272
• Last update: 10.03.2025, 11:42 AM CET