• Introduction
  • People require far more compensation to give up a public good than they are willing to pay to acquire it.
• 3 main hypotheses
• Study design & data collection
  • Indirect utility function
  • Willingness to accept
  • Willingness to pay
  • In a willingness-to-pay environment, consumers tend to respond in a way that understate their actual demand for the public good
  • In a willingness-to-accept environment, they will overstate the compensation required
  • Without a market-like elicitation, this discrepancy/asymmetry/value gap is unlikely to disappear
  • Individuals tend to 'avert losses' when valuing public goods, specifically, they tend to value loss more than gain of the same level
  • Such value gaps will disappear in a market-like environment
• Findings & analysis
  • Reference point: the an-acre Troutman Park with 200 trees (10 trees per acre) in total
  • Test subjects about their willingness to accept fewer trees and willingness to pay for more trees.
  • Compensation demanded from willingness to accept experiments are about 75 times higher than the amount they are willing to pay for increase
  • Possible anchors (compensation from experiment teams) were not a focal point in their bidding behavior
• Conclusion
  • The most important conclusion is the magnitude of loss-aversion phenomenon is sensitive to how 'market-like' these value measuring attempts are.
  • Repeating auction may get everyone to (more or less) take their decisions seriously and the measured value will likely be more accurate or closer to their 'actual value'
• Thoughts
  • Many value measuring models in the blockchain/Web3 industry rely on voting on an arbitrary value proposed either by someone from the organization that developed the public goods or the organization that runs a funding program. Such qualitive modelling will fall short when more and more public goods emerge.
  • This quantitative method provides a possible solution for measuring the (change in) value of any public good. It should be noted, however, that the example (trees) in this paper is in many ways different from public goods in the Web3 industry, where everything on blockchain may turn into an opportunity for speculation.
  • Experiments may be conducted in manners exhibited in this paper - mini auctions that associates value with people's (beneficiaries, users from such public goods) willingness to pay for a certain infrastructure.
  • One advantage Web3 public goods have over traditional public goods is that its scalability makes it easier for us to estimate its value. Even if we can say definitively that people are willing to pay $10 per person for 25 tree increment in their neighborhood, we can never put a definitive value of planting 200 trees in a barren neighborhood since planting trees has much more overhead than running some infrastructure on the blockchain - or, it is much less scalable.
  • One of the major challenges is that anyone may stand to gain from overvaluing a certain public goods, driving up the value of a single project or divert more funds to projects with more speculative elements.