Valuation in Cost-Benefit Analysis: Choosing between Offer Prices and Asking Prices as the Appropriate Measure of Willingness to Pay

Authors

Gregory S. Crespi, Southern Methodist University, Dedman School of LawFollow

Abstract

Cost-benefit analysis is a well-known technique for evaluating the merits of a policy by attempting to quantify in financial terms all of the costs and benefits that will result from its implementation. In this article, the author focuses on the important question of whether offer prices or asking prices are the theoretically appropriate measure in determining "willingness to pay" and overall efficiency consequences when conducting a cost-benefit analysis. The author surveys the existing literature on this valuation question and offers personal conclusions and recommendations.

Publication Title

John Marshall Law Review

Document Type

Article

Keywords

Cost-Benefit Analysis, Federal Administrative Rulemaking – Role of Cost-Benefit Analysis, Willingness to Pay, Valuation Methods, Kaldor-Hicks Efficiency

Recommended Citation

Gregory Crespi, Valuation in Cost-Benefit Analysis: Choosing between Offer Prices and Asking Prices as the Appropriate Measure of Willingness to Pay, 39 J. Marshall L. Rev. 429 (2006)