Willingness To Pay and Willingness To Accept: How Much Can They Differ? Comment

摘要

In the case of exogenous changes in the quantities of public goods, large deviations of WTA from WTP, including infinite WTA, can arise without perfect complementarity between the public good and the market goods. All that is required is that the utility function be asymptotically bounded, a condition that does not violate any axiom of neoclassical consumer theory. The assumption of asymptotically bounded utility avoids a rather implausible implication of unbounded utility functions, namely that a sufficient quantity of any one good can substitute for the loss of nearly the entire quantity of all other goods. While this hyper-substitutability may be viewed as largely innocuous in the case of private goods (where it may only have implications at extreme levels of consumption), in the case of public goods it has important implications even at moderate levels of consumption. With many public goods, the quantity consumed is determined exogenously to the individual consumer. If utility is asymptotically bounded, this may preclude full compensation. With private goods, compensatory additions to a consumer's income can be used to purchase additional units of an important good whose price has risen, thus leaving the consumer "whole." But with public goods, the additional income can provide full compensation only if the market goods that can be purchased with the income are adequate substitutes for the public good whose quantity has been exogenously reduced. In the case of bounded utility functions, it may not be possible to provide adequate compensation through substitution.