Willingness-to-pay and the equivalence approach

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Abstract

This paper describes the evaluation of individual situations in terms of equivalent incomes (or money-metric utilities) computed from ordinary income by adding or subtracting various terms of willingness-to-pay. It discusses the origin of the approach and its connection with social choice theory, fair allocation theory, and philosophical principles. It shows how this has been generalized into a broader "equivalence approach", and argues that the criticisms that have been raised against this methodology are not compelling. It also examines the challenges to be addressed for empirical applications of the approach.

Original languageEnglish (US)
Pages (from-to)35-58
Number of pages24
JournalRevue d'Economie Politique
Volume121
Issue number1
DOIs
StatePublished - 2011

All Science Journal Classification (ASJC) codes

  • Political Science and International Relations

Keywords

  • Equivalence approach
  • Fair allocation
  • Social choice
  • Willingness-to-pay

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