Aside from possible income effects, measures of the maximum amounts people will pay to avoid a loss and the minimum compensation necessary for them to accept it are generally assumed to be equivalent. Unexpectedly wide variations between these sums, however, have been noted in survey responses to hypothetical options. This paper reports the results of a series of experiments that confronted people with actual money payments and cash compensations. The results indicate that the compensation measure of value seems to exceed significantly the willingness to pay measure, which would appear to call into some question various rules of entitlement, damage assessments, and interpretations of indifference curves.

Estimators obtained by maximizing a likelihood function are studied in the case where the true p.d.f. does not necessarily belong to the family chosen for the likelihood function. When such a procedure is applied to the estimation of the parameters of the first order moments, it is possible to prove a necessary and sufficient condition for its consistency. Asymptotic normality is shown as well as the existence of a lower bound for the asymptotic covariance matrix. It is also seen that this bound can be reached if consistent estimates are available for the parameters of the second order moments. Finally, a necessary and sufficient condition for the consistency if the pseudo maximum likelihood estimation of the first and second moments is given.

Jeong J. Rhee, John A. Miranowski, Determination of Income, Production, and Employment Under Pollution Control: An Input-Output Approach, The Review of Economics and Statistics, Vol. 66, No. 1 (Feb., 1984), pp. 146-150