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Public benefit-cost analysis of market policies often relies on a particular definition of market surplus that adds up consumer and producer surplus and external costs. This paper provides an overview of conceptual strategies to deal with moral considerations and then develops an adjusted market...
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Assuming individual preferences satisfy the Von Neumann-Morgenstern axioms for expected utility we show how we can … measure an individual's expected utility of any state using their willingness to accept a gamble over two reference points …. The utility function captures the diminishing marginal utility of money with income and risk aversion over gambles. This …
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