Arbeitspapier

What can I get for it? The relationship between the choice equivalent, willingness to accept and willingness to pay

We hypothesise and confirm a novel empirical result concerning the willingness to accept (WTA)-willingness to pay (WTP) disparity. Employing data from what has become the classic experimental design, we reveal systematic variation in the relative magnitudes of three valuations: WTA, WTP and choice equivalent (CE). Individuals with low CE relative to others set a proportionally higher WTA, while those with high CE set a proportionally lower WTP. The effect size is substantial in relation to the WTA-WTP disparity itself. These results are predicted by a model in which subjects behave as if maximising surplus over a sequence of exchange encounters, as typifies real exchanges outside the laboratory. They are at odds with models based on loss aversion, which either predict constant relativities between the three valuations or the opposite of the pattern observed.

Language
Englisch

Bibliographic citation
Series: ESRI Working Paper ; No. 479

Classification
Wirtschaft
Subject
endowment effect
willingness to pay
willingness to accept
loss aversion

Event
Geistige Schöpfung
(who)
Lunn, Pete
Lunn, Mary
Event
Veröffentlichung
(who)
The Economic and Social Research Institute (ESRI)
(where)
Dublin
(when)
2014

Handle
Last update
10.03.2025, 11:43 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Lunn, Pete
  • Lunn, Mary
  • The Economic and Social Research Institute (ESRI)

Time of origin

  • 2014

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