An Approach to the Problem of Estimating Demand for Public Goods

Abstract

The purpose of this paper is to advance a procedure for estimating the demand for public goods (such as environmental quality) in the probably normal case where the authorities have no idea about the aggregate maximum willingness to pay in relation to costs nor about the willingness to pay in different consumer groups which are possible to distinguish from the taxation point of view. It is argued that the procedure advanced here will avoid creating incentives to misrepresent individual preferences. Moreover, it conforms to the real-world situation where an optimal payment or taxation distribution cannot be decided upon prior to estimation of demand.

The author is indebted to Professor Edmond Malinvaud, Mr Alf Carling, Mr Leif Magnusson and Mr Lewis Taylor for many helpful comments on an earlier version of this paper.