Indirect methods for valuing changes in environmental risks with nonexpected utility preferences

Theoretical models for estimating individuals' values for sure improvements in environmental quality are well developed. These models can be classified as being based on averting behavior, hedonic prices, or weak complementarity. Some of these models have also been applied to the task of valuing changes in risk based on expected utility theory. This article provides a systematic development of these models for changes in either the probability or the magnitude of an uncertain event and shows that the derived expressions for individual marginal willingness to pay can be generalized to nonexpected utility preferences as long as the index of preferences is continuous, convex, and twice differentiable.