The definition of market value: Criteria for judging proposed definitions and an analysis of three controversial components

A weakness in most discussions about definitions of market value is that no explicit criteria for judging whether a definition is good or bad are presented. In this article three criteria are analysed: the definition should have a clear meaning, the definition should be such that it is possible to know, at least approximately, what the market value is, and finally that the definition should lead to a concept that is relevant for actors on the market. These three criteria are then used to analyse three questions: “Should the definition include a reference to prudent and knowledgeable actors?”, “Should the definition refer to willing buyers and sellers?” and finally, “How shall we interpret the concept of expected or probable price?” The answer to the first and second question is no. The answer to the third question is that a frequency interpretation of probability should be rejected in valuation contexts, in favour of an interpretation where probability is identified with a rationally justified degree of confidence.