Estimating four Hicksian welfare measures for a public good: A contingent valuation investigation

Using equivalent loss (the monetary loss equivalent to a proposed amenity reduction, EL) and equivalent gain (the gain equivalent to a proposed amenity increase, EG) alongside traditional welfare measures in a contingent valuation study of traffic disamenity, we report an experiment designed to test theoretical explanations of the well-known disparity between compensating surplus and equivalent surplus measures of welfare. No compelling evidence is found in favor of loss aversion as a cause of the disparity. Meanwhile, as valuation measures, the performance of EL is similar to the traditional willingness to pay for a gain, while EG performs poorly. (JEL Q26).