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Imprecise Preferences and the WTP-WTA Disparity

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  • Dubourg, W R
  • Jones-Lee, M W
  • Loomes, Graham
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    Abstract

    This article reports the results of a study designed to elicit willingness to pay (WTP) and willingness to accept (WTA) values for changes in the risk of nonfatal road injuries. We examine the possibility that individuals' preferences over combinations of wealth, risk, and safety are imprecise, and that this imprecision might result in the observed disparity between WTP and WTA measures of value. The results confirm that individuals' preferences for safety are significantly imprecise, but that this alone is insufficient to explain more than part of the disparity. Indeed, respondents' estimates of the minimum that they would be prepared to accept for a risk increase frequently exceed the maximum that they would be prepared to pay for an equivalent risk reduction. Copyright 1994 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Risk and Uncertainty.

    Volume (Year): 9 (1994)
    Issue (Month): 2 (October)
    Pages: 115-33

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    Handle: RePEc:kap:jrisku:v:9:y:1994:i:2:p:115-33

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    Web page: http://www.springerlink.com/link.asp?id=100299

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    Cited by:
    1. Schmidt, Ulrich & Traub, Stefan, 2009. "An experimental investigation of the disparity between WTA and WTP for lotteries," Open Access Publications from Kiel Institute for the World Economy 28786, Kiel Institute for the World Economy (IfW).
    2. Horowitz, John K. & McConnell, Kenneth E., 2002. "A Review of WTA/WTP Studies," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 426-447, November.
    3. Richard Ready & Ståle Navrud & Brett Day & Richard Dubourg & Fernando Machado & Susana Mourato & Frank Spanninks & Maria Rodriquez, 2004. "Benefit Transfer in Europe: How Reliable Are Transfers between Countries?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 29(1), pages 67-82, September.
    4. Charles R. Plott & Kathryn Zeiler, 2005. "The Willingness to Pay–Willingness to Accept Gap, the "Endowment Effect," Subject Misconceptions, and Experimental Procedures for Eliciting Valuations," American Economic Review, American Economic Association, vol. 95(3), pages 530-545, June.
    5. Christian Schlereth & Christine Eckert & Bernd Skiera, 2012. "Using discrete choice experiments to estimate willingness-to-pay intervals," Marketing Letters, Springer, vol. 23(3), pages 761-776, September.
    6. Thomas Hammerschmidt & Hans-Peter Zeitler & Reiner Leidl, 2004. "A utility-theoretic approach to the aggregation of willingness to pay measured in decomposed scenarios: development and empirical test," Health Economics, John Wiley & Sons, Ltd., vol. 13(4), pages 345-361.
    7. Whittington, Dale & Hua Wang, 2000. "Willingness to pay for air quality improvements in Sofia, Bulgaria," Policy Research Working Paper Series 2280, The World Bank.
    8. Glenn Blomquist & Karen Blumenschein & Magnus Johannesson, 2009. "Eliciting Willingness to Pay without Bias using Follow-up Certainty Statements: Comparisons between Probably/Definitely and a 10-point Certainty Scale," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 43(4), pages 473-502, August.
    9. Bernie J. O'Brien & Kirsten Gertsen & Andrew R. Willan & A. Faulkner, 2002. "Is there a kink in consumers' threshold value for cost-effectiveness in health care?," Health Economics, John Wiley & Sons, Ltd., vol. 11(2), pages 175-180.
    10. Christian A. Vossler & Robert G. Ethier & Gregory L. Poe & Michael P. Welsh, 2003. "Payment Certainty in Discrete Choice Contingent Valuation Responses: Results from a Field Validity Test," Southern Economic Journal, Southern Economic Association, vol. 69(4), pages 886-902, April.
    11. Klose, Thomas, 1999. "The contingent valuation method in health care," Health Policy, Elsevier, vol. 47(2), pages 97-123, May.
    12. Chuan-zhong Li & Jari Kuuluvainen & Eija Pouta & Mika Rekola & Olli Tahvonen, 2004. "Using Choice Experiments to Value the Natura 2000 Nature Conservation Programs in Finland," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 29(3), pages 361-374, November.
    13. Wang,Hua & Laplante, Benoit & Xun Wu & Meisner, Craig, 2004. "Estimating willingness-to-pay with random valuation models : an application to Lake Sevan, Armenia," Policy Research Working Paper Series 3367, The World Bank.
    14. Mar�a Xosé Vázquez & Jorge E. Ara�a & Carmelo J. León, 2006. "Economic evaluation of health effects with preference imprecision," Health Economics, John Wiley & Sons, Ltd., vol. 15(4), pages 403-417.
    15. Hurle, Jesus Barreiro & Garcia, Jose Maria Casada & Perez y Perez, Luis, 2005. "Incorporating Uncertainty and Cero Values into the Valuation of Protected Areas and Species," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24745, European Association of Agricultural Economists.
    16. Welsh, Michael P. & Poe, Gregory L., 1998. "Elicitation Effects in Contingent Valuation: Comparisons to a Multiple Bounded Discrete Choice Approach," Journal of Environmental Economics and Management, Elsevier, vol. 36(2), pages 170-185, September.
    17. repec:ebl:ecbull:v:4:y:2004:i:1:p:1-7 is not listed on IDEAS
    18. Mandy Ryan & Fernando San Miguel, 2003. "Revisiting the axiom of completeness in health care," Health Economics, John Wiley & Sons, Ltd., vol. 12(4), pages 295-307.
    19. Bleichrodt, Han & Filko, Martin, 2008. "New tests of QALYs when health varies over time," Journal of Health Economics, Elsevier, vol. 27(5), pages 1237-1249, September.
    20. Khantachavana, Sivalai V. & Turvey, Calum G. & Kong, Rong & Xia, Xianli, 2013. "On the transaction values of land use rights in rural China," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 863-878.
    21. Bleichrodt, Han & Johannesson, Magnus, 1997. "Standard gamble, time trade-off and rating scale: Experimental results on the ranking properties of QALYs," Journal of Health Economics, Elsevier, vol. 16(2), pages 155-175, April.

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