scholarly journals Consumer surplus and budget constrained preference maximization: A note

2020 ◽  
Vol 21 (1) ◽  
pp. 49
Author(s):  
Somdeb Lahiri
Keyword(s):  
Willingness To Pay ◽  
Cost Benefit Analysis ◽  
Demand Curve ◽  
Consumer Surplus ◽  
Cost Benefit ◽  
Applied Economics ◽  
Happy Ending ◽  
Mba Programs ◽  
Main Text ◽  
Demand Curves

The paper attempts to rectify what appear to be popular but elementary misconceptions about the concept of consumer surplus in the context of Marshallian demand curves. It is primarily addressed to teachers of microeconomics at the undergraduate level or in MBA programs of business schools. The main text informs the reader about the model/context and the results we are concerned with, all of the latter being a comprehensive teaching note, relegated to an appendix of the paper. Thus, the potential instructor may use the main text to motivate himself/herself and at the same time inform his/her students as to the topic i.e. the rehabilitation of consumer surplus as an exact measure of welfare from the stand-point of cost benefit analysis. Thereafter the appendix can be referred to for a more formal presentation. The technical results contained in the appendix begin by showing that willingness to pay is the area under the demand curve if and only if consumers are surplus maximizers. The last result in the appendix is a theoretically ‘happy ending’ since it shows that for purposes of applied economics, budget constrained preference maximization implies surplus maximization and hence for such consumers, willingness to pay is indeed the area under the demand curve up to the quantity consumed.

scholarly journals Demand Analysis of Recreation Visits to Chitral Valley: A Natural Resource Management Perspective

2007 ◽  
Vol 46 (4II) ◽  
pp. 971-984 ◽  
Author(s):  
Muhammad Rafiq ◽  
Shafiqullah .
Keyword(s):  
Resource Management ◽  
Natural Resource Management ◽  
Policy Change ◽  
Social Exchange ◽  
Natural Resource ◽  
Cost Benefit Analysis ◽  
Demand Curve ◽  
Consumer Surplus ◽  
Cost Benefit ◽  
Cultural Economic

Recreational visits are primarily about human activity which involves travel from an originating area to a destination for cultural, economic, and social exchange processes. People travel to exotic locations for sight seeing, picnicking, bird watching, and for cultural and religious settings. However, accessibility to such areas is often free, which not only results in environmental hazards but also deprives the cash destitute government from revenue that such these sites offer. Valuing the recreational benefits associated with a destination based on tourists’ preferences can help formulate an appropriate policy for Natural Resource Management (NRM). Environmental and natural resource management studies often try to measure the welfare change associated with a policy change. Welfare is generally defined as area under the demand curve; accordingly, by estimating the demand curve, consumer surplus is obtained which shows the welfare changes associated with an environmental policy change [Gunatilake (2003)]. The recreational values thus obtained can be utilised for a cost benefit analysis of a policy option, thereby, managing a park or a natural resource on a sustainable basis.

Assessing Urban Residents' Willingness to Pay for Preserving the Biodiversity of Swamp Forest

2017 ◽  
pp. 946-970
Author(s):  
Huynh Viet Khai
Keyword(s):  
Willingness To Pay ◽  
Biodiversity Conservation ◽  
Cost Benefit Analysis ◽  
Mekong Delta ◽  
Cost Benefit ◽  
Urban Residents ◽  
Swamp Forest ◽  
Policy Makers ◽  
Welfare Losses ◽  
Conservation Projects

Measuring the biodiversity value in monetary could be useful information for policy-makers to estimate welfare losses caused by biodiversity reductions and perform cost-benefit analysis of biodiversity conservation projects. This study applied the approach of contingent valuation to analyze the Mekong Delta urban households' preferences and their willingness to pay for the program of biodiversity conservation in U Minh Thuong National Park, one of the largest peat swamp forests in Vietnam. The study estimated that the mean WTP of urban residents in the Mekong Delta was about VND16,510 ($0.78) per household per month for all respondents and around VND31,520 ($1.49) after excluding the protest zero and scenario rejecting respondents. Aggregately, they agreed to contribute about $10.97 million annually for the project of biodiversity conservation.

Benefit-transfer valuation of a cultural heritage site: the Petroglyph National Monument

2009 ◽  
Vol 15 (1) ◽  
pp. 39-57 ◽  
Author(s):  
CARLOS A. ULIBARRI ◽  
VICTOR C. ULIBARRI
Keyword(s):  
Willingness To Pay ◽  
Cultural Heritage ◽  
Cost Benefit Analysis ◽  
Rock Art ◽  
Economic Value ◽  
Cost Benefit ◽  
Economic Benefits ◽  
Benefit Transfer ◽  
National Monument ◽  
Heritage Site

ABSTRACTThis paper applies a household production framework (Becker, 1971) to infer the economic value of a cultural heritage site, namely, the Petroglyph National Monument, situated in Albuquerque, New Mexico, USA. The empirical analysis uses benefit-transfer techniques from three source studies: those of Bergstrom and Cordell (1991) and Boxall et al. (2003), which concern willingness-to-pay to hike and view rock art sites; and those of Rolfe and Windle (2003, 2006), which concern willingness-to-pay by Aboriginal and general populations to preserve a cultural heritage site containing rock art. The benefit-transfer analysis estimates recreational values between 3.75 million and 7 million dollars per year (depending on perceptions of the cultural attribute quality) and a nonuse value of approximately 12.5 million dollars per year. By comparison the annualized costs of developing/operating the study site are 8.5 million dollars per year. Thus a partial cost-benefit analysis suggests the study site yields net economic benefits upwards of 7.8 million dollars per year.

The Concept of Cost in the Economic Evaluation of Health Care: A Theoretical Inquiry

1994 ◽  
Vol 10 (4) ◽  
pp. 675-682 ◽  
Author(s):  
Magnus Johannesson
Keyword(s):  
Health Care ◽  
Economic Evaluation ◽  
Willingness To Pay ◽  
Treatment Program ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Economic Evaluations ◽  
Benefit Analysis ◽  
Full Economic Evaluation ◽  
The Individual

AbstractThe costs included in economic evaluations of health care vary from study to study. Based on the theory of cost-benefit analysis, the costs that should be included in an economic evaluation are those not already included in the measurement of willingness to pay (net willingness to pay above any treatment costs paid by the individual) in a cost-benefit analysis or in the easurement of effectiveness in a cost-effectiveness analysis. These costs can be defined as the onsumption externality of the treatment (the change in production minus consumption for those included in the treatment program). For a full economic evaluation, the consequences for those included in the treatment program and a caring externality (altruism) should also be added.

scholarly journals Mortality-risk valuation, age and cause of death: out-of-hospital cardiac arrest

2017 ◽  
Vol 5 (2) ◽  
pp. 28-40
Author(s):  
Björn Sund
Keyword(s):  
Cardiac Arrest ◽  
Willingness To Pay ◽  
Cause Of Death ◽  
Road Traffic ◽  
Cost Benefit Analysis ◽  
Stated Preference ◽  
Cost Benefit ◽  
Transport Sector ◽  
Benefit Analysis ◽  
Hospital Cardiac Arrest

Economic evaluation of policies regarding out-of-hospital cardiac arrest (OHCA) is important. The value of a statistical life (VSL) for OHCA victims is the most important component in a cost-benefit analysis of interventions that have the possibility to reduce mortality from this cause. This value is not known. We use responses to a national Swedish mail survey, based on the stated-preference technique to directly elicit individuals’ hypothetical willingness to pay for a reduced risk of dying from OHCA. A lower-bound estimate of VSL for OHCA would be in range of SEK 30 to 50 million. The value is found to be higher than for comparable VSL estimates from the transport sector, even though individuals who suffer OHCAs are generally older and less healthy than people who die in road traffic accidents. The results indicate that it is not an overestimation to use the ‘baseline’ VSL value from the transport sector (SEK 24 million) in cost-benefit analysis of OHCA policy decisions and that the cause of death is important when examining willingness to pay for death risk reductions. We do not support a general declining VSL due to the age of the victims, i.e. a ‘senior death discount’, for this cause of death.Published: Online January 2017. In print December 2017.

Robotic radiosurgery for the treatment of one to three brain metastases: A pragmatic application of cost-benefit analysis using willingness to pay.

2012 ◽  
Vol 30 (34_suppl) ◽  
pp. 17-17
Author(s):  
Jeffrey Noah Greenspoon ◽  
Waseem Sharieff ◽  
Anthony Whitton ◽  
Timothy Joseph Whelan ◽  
Jim R. Wright ◽  
...  
Keyword(s):  
Brain Metastases ◽  
Willingness To Pay ◽  
Incremental Cost ◽  
New Technologies ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Decision Makers ◽  
Benefit Analysis ◽  
Robotic Radiosurgery ◽  
Starting Point

17 Background: With the emergence of radiosurgery as a new radiotheraputic technique, health care decision makers are required to incorporate community need, cost and patient preferences when allocating radiosurgery resources. Conventional patient utility measures would not reflect short term preferences and would therefore not inform decision makers when allocating radiosurgery treatment units. The goal of this article is to demonstrate the feasibility of cost-benefit analysis to elicit the yearly net monetary benefit of robotic radiosurgery. Methods: To calculate the yearly incremental cost of robotic radiosurgery as compared to fixed-gantry radiosurgery we used direct local cost data. We assumed a standard 10 year replacement and 5% amortization rate. Decision boards summarizing the clinical scenario of brain metastases and the difference between robotic and fixed-gantry radiosurgery in terms of immobilization, comfort and treatment time were then presented to a sample of 18 participants. Participants who preferred robotic radiosurgery were randomly assigned to either a low ($1) or high ($5) starting point taxation based willingness-to-pay algorithm. Results: The yearly incremental cost of providing robotic radiosurgery was $99,177. The mean community yearly willingness-to pay for robotic radiosurgery was $2,300,000, p=0.03. The calculated yearly net societal benefit for robotic radiosurgery was $2,200,823. Among participants who preferred robotic radiosurgery there was no evidence of starting point bias, p=0.8. Conclusions: We have shown through this pilot study that it is feasible to perform cost-benefit analysis to evaluate new technologies in Radiation Oncology. Cost-benefit analysis offers an analytic method to evaluate local preferences and provide accountability when allocating limited healthcare resources.

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