Measuring the Value of a Public Good: An Empirical Comparison of Elicitation Procedures

Abstract

The problems associated with accurately measuring the value of a public good in an applied setting are considered. The values obtained from hypothetical elicitation procedures are compared and contrasted with those obtained in a marketplace. When hypothetical measurements are elicited in the field, buying-selling discrepancies similar to those predicted by psychological models of behavior are observed. However, when the market-like elicitation process is repeated, values are more consistent with diminishing marginal utility. The authors cannot reject the hypothesis that these individuals exhibit loss- aversion behavior. The marketplace, however, is a strong disciplinarian of limiting this type of behavior. Copyright 1987 by American Economic Association.