International Review of Environmental and Resource Economics > Vol 14 > Issue 2-3

Behavioural Economics, Benefit-Cost Analysis, and the WTP versus WTA Choice

Jack L. Knetsch, Department of Economics, Simon Fraser University, Canada and Civil Service College, Singapore,
Suggested Citation
Jack L. Knetsch (2020), "Behavioural Economics, Benefit-Cost Analysis, and the WTP versus WTA Choice", International Review of Environmental and Resource Economics: Vol. 14: No. 2-3, pp 153-196.

Publication Date: 20 Oct 2020
© 2020 J. L. Knetsch
Environmental Economics,  Public Economics
JEL Codes: D61D90H23Q51
Choice of welfare measurewillingness-to-acceptwillingness-to-paybenefit-cost analysisassessment of losses


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In this article:
1. Introduction 
2. Behavioural Economic Anomalies 
3. Reference-Dependent Preferences and Value Disparities 
4. Avoidance of the Agreed Choice 
5. The BP Oil Spill Valuation Study 
6. Some Implications of the Disparity in Valuations 
7. Conclusions and a Suggestion for Reform 


Many of the findings from behavioural economics research offer useful opportunities to better understand and anticipate people's choices among alternatives and to improve policy design accordingly. Their use has, however, varied among fields — being widely employed in some and mainly ignored in others. Major issues and likely understatements resulting from current practice are illustrated in the recent assessment of the monetary value of damages resulting from the BP Deepwater Horizon oil spill.