Measuring values for environmental resources under uncertainty

Abstract

The relationship between conventional Hicksian measures of the benefits from changes in environmental amenities under certainty, and corresponding measures of valuation when the conditions of access to an uncertain environmental resource are changed, is considered. The analysis utilizes a contingent commodity framework with the assumption of state-dependent preferences. The findings suggest that the valuation of these changes will depend upon the availability of fair markets for diversifying risk. Moreover, conventional measures of compensating or equivalent surplus will not necessarily bound the individual's valuation of a change in access to an uncertain environmental resource.