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Cost-Benefit Analysis provides accessible, comprehensive, authoritative, and practical treatments of the protocols for assessing the relative efficiency of public policies. Its review of essential concepts from microeconomics, and its sophisticated treatment of important topics with minimal use of mathematics helps students from a variety of backgrounds build solid conceptual foundations. It provides thorough treatments of time discounting, dealing with contingent uncertainty using expected surpluses and option prices, taking account of parameter uncertainties using Monte Carlo simulation and other types of sensitivity analyses, revealed preference approaches, stated preference methods including contingent valuation, and other related methods. Updated to cover contemporary research, this edition is considerably reorganized to aid in student and practitioner understanding, and includes eight new cases to demonstrate the actual practice of cost-benefit analysis. Widely cited, it is recognized as an authoritative source on cost-benefit analysis. Illustrations, exhibits, chapter exercises, and case studies help students master concepts and develop craft skills.

Written in a highly readable and user-friendly style to provide a comprehensive take on cost-benefit analysis
Spreadsheet exercises will allow students to work with numbers and assumptions so instructors can increase the level and range of the problems assigned
Case studies and exhibits throughout the text show actual applications of cost-benefit analysis



Table of Contents

1. Introduction to cost-benefit analysis
2. Conceptual foundations of cost-benefit analysis
3. Microeconomic foundations of cost-benefit analysis
4. Valuing impacts from observed behavior: direct estimation of demand schedules
Case: use of demand schedules in regulatory impact analyses
5. Valuing impacts in output markets
6. Valuing impacts in input markets
7. Valuing impacts in secondary markets
8. Predicting and monetizing impacts
Case: WSIPP CBA of the nurse-family partnership program
9. Discounting future impacts and handling inflation
Case: a CBA of the North-East mine development project
10. The social discount rate
11. Dealing with uncertainty: expected values, sensitivity analysis, and the value of information
Case: using Monte Carlo simulation: assessing the net benefits of early detection of Alzheimer´s Disease
12. Risk, option price and option value
13. Existence value
14. Valuing impacts from observed behavior: experiments and quasi experiments
Case: findings from CBAs of welfare-to-work programs
15. Valuing impacts from observed behavior: indirect market methods
16. Contingent valuation: using surveys to elicit information about costs and benefits
Case: using contingent valuation to estimate benefits from higher education
17. Shadow prices from secondary sources
Case: shadow pricing a high school diploma
18. Cost-effectiveness analysis and cost-utility analysis
19. Distributionally weighted CBA
Case: the Tulsa IDA account program
20. How accurate is CBA?