Abstract

This chapter discusses the utility of cost-benefit analysis in decision making, specifically environmental decision making. For the purposes of the discussion here, it uses a type of CBA that incorporates two controversial characteristics, namely, the assumption of comparability and the willingness-to-pay measure. The chapter aims to show that the recognition of a well motivated holistic decision-making strategy can shed light on debates regarding CBA. This strategy is concerned with patterns of choices rather than individual ones, and corresponds with two familiar phenomena—the “pricing” of alternatives and the “embedding effect” in willingness-to-pay studies. This chapter also differentiates CBA from cost-preparedness analysis, and concludes that there need not be any inconsistency in pricing alternatives deemed incomparable and that willingness-to-pay studies can be more accurately interpreted as tracking the “preparedness to pay.”.