IDEAS home Printed from https://ideas.repec.org/a/sae/urbstu/v51y2014i2p412-427.html
   My bibliography  Save this article

How Do Landowners Price their Lands during Land Expropriation and the Motives Behind It: An Explanation from a WTA/WTP Experiment in Central Beijing

Author

Listed:
  • Zhongyu He
  • Yasushi Asami

Abstract

Compensation paid to property owners for land expropriation is always a controversial topic, partly due to the difficulty in revealing households’ true valuation of their housing. This paper estimates and discusses the widely observed ‘willingness to accept–willingness to pay’ (WTA–WTP) gap for surveyed residents of their own houses during land expropriation. By testing several hypotheses interpreting the WTA–WTP disparity from previous studies, the paper tries to establish the incentive for households’ decision-making. The paper employs a contingent valuation method with data from 315 household interviews in central Beijing, China. The paper reports an average WTA/WTP ratio of 3.74 and reaches the conclusion that in our case the high compensation required by property owners largely derives from opportunistic pricing behaviour rather than sentimental attachment to the dwellings that is unobservable in the market price, and that the WTA of the residents is intentionally overpriced.

Suggested Citation

  • Zhongyu He & Yasushi Asami, 2014. "How Do Landowners Price their Lands during Land Expropriation and the Motives Behind It: An Explanation from a WTA/WTP Experiment in Central Beijing," Urban Studies, Urban Studies Journal Limited, vol. 51(2), pages 412-427, February.
    • Handle: RePEc:sae:urbstu:v:51:y:2014:i:2:p:412-427
    DOI: 10.1177/0042098013492227
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0042098013492227
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0042098013492227?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Nosal, Ed, 2001. "The taking of land: market value compensation should be paid," Journal of Public Economics, Elsevier, vol. 82(3), pages 431-443, December.
    2. Lee, Choong-Ki & W. Mjelde, James, 2007. "Valuation of ecotourism resources using a contingent valuation method: The case of the Korean DMZ," Ecological Economics, Elsevier, vol. 63(2-3), pages 511-520, August.
    3. Miceli, Thomas J. & Sirmans, C.F., 2007. "The holdout problem, urban sprawl, and eminent domain," Journal of Housing Economics, Elsevier, vol. 16(3-4), pages 309-319, November.
    4. Fujita,Masahisa, 1991. "Urban Economic Theory," Cambridge Books, Cambridge University Press, number 9780521396455, January.
    5. Zhao, Jinhua & Kling, Catherine L., 2001. "A new explanation for the WTP/WTA disparity," Economics Letters, Elsevier, vol. 73(3), pages 293-300, December.
    6. Sayman, Serdar & Onculer, Ayse, 2005. "Effects of study design characteristics on the WTA-WTP disparity: A meta analytical framework," Journal of Economic Psychology, Elsevier, vol. 26(2), pages 289-312, April.
    7. Wheaton, William C., 1977. "A bid rent approach to housing demand," Journal of Urban Economics, Elsevier, vol. 4(2), pages 200-217, April.
    8. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    9. Brown, Thomas C., 2005. "Loss aversion without the endowment effect, and other explanations for the WTA-WTP disparity," Journal of Economic Behavior & Organization, Elsevier, vol. 57(3), pages 367-379, July.
    10. Hanemann, W Michael, 1991. "Willingness to Pay and Willingness to Accept: How Much Can They Differ?," American Economic Review, American Economic Association, vol. 81(3), pages 635-647, June.
    11. Lawrence Blume & Daniel L. Rubinfeld & Perry Shapiro, 1984. "The Taking of Land: When Should Compensation Be Paid?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(1), pages 71-92.
    12. Eckart, Wolfgang, 1985. "On the land assembly problem," Journal of Urban Economics, Elsevier, vol. 18(3), pages 364-378, November.
    13. 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.
    14. Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-597, September.
    15. William S. Breffle & Edward R. Morey & Tymon S. Lodder, 1998. "Using Contingent Valuation to Estimate a Neighbourhood's Willingness to Pay to Preserve Undeveloped Urban Land," Urban Studies, Urban Studies Journal Limited, vol. 35(4), pages 715-727, April.
    16. Strange William C., 1995. "Information, Holdouts, and Land Assembly," Journal of Urban Economics, Elsevier, vol. 38(3), pages 317-332, November.
    17. Bishop, Richard C. & Heberlein, Thomas A., 1979. "Measuring Values Of Extramarket Goods: Are Indirect Measures Biased?," 1979 Annual Meeting, July 29-August 1, Pullman, Washington 277818, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    18. Fischel, William A & Shapiro, Perry, 1988. "Takings, Insurance, and Michelman: Comments on Economic Interpretations of "Just Compensation" Law," The Journal of Legal Studies, University of Chicago Press, vol. 17(2), pages 269-293, June.
    19. Wiktor L. Adamowicz & Vinay Bhardwaj & Bruce Macnab, 1993. "Experiments on the Difference between Willingness to Pay and Willingness to Accept," Land Economics, University of Wisconsin Press, vol. 69(4), pages 416-427.
    20. Richard C. Bishop & Thomas A. Heberlein, 1979. "Measuring Values of Extramarket Goods: Are Indirect Measures Biased?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 61(5), pages 926-930.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yongchun Yang & Deli Zhang & Qingmin Meng & Corrin McCarn, 2015. "Urban Residential Land Use Reconstruction under Dual-Track Mechanism of Market Socialism in China: A Case Study of Chengdu," Sustainability, MDPI, vol. 7(12), pages 1-17, December.
    2. Zillante, Artie & Read, Dustin C. & Seiler, Michael J., 2020. "Assembling land for urban revitalization in the presence of linchpin parcels and information asymmetries: An experimental investigation," Land Use Policy, Elsevier, vol. 99(C).
    3. Yongle Li & Bangrong Shu & Xiaoping Shi & Yu Zhu, 2017. "Variation of Land-Expropriated Farmers’ Willingness: A Perspective of Employment and Inhabitance," Sustainability, MDPI, vol. 9(7), pages 1-18, June.
    4. Helen Bao & Chunming Meng, 2017. "Loss Aversion and Residential Property Development Decisions in China: A Semi-Parametric Estimation," ERES eres2017_156, European Real Estate Society (ERES).
    5. Li, Xin & Kleinhans, Reinout & van Ham, Maarten, 2017. "Ambivalence in Place Attachment: The Lived Experiences of Residents in Declining Neighbourhoods Facing Demolition in Shenyang, China," IZA Discussion Papers 10515, Institute of Labor Economics (IZA).
    6. Bao, Helen X. H. & Meng, Charlotte Chunming, 2017. "Loss Aversion and Residential Property Development Decisions in the People’s Republic of China: A Semi-Parametric Estimation," ADBI Working Papers 640, Asian Development Bank Institute.
    7. Cao, Yingui & Dallimer, Martin & Stringer, Lindsay C. & Bai, Zhongke & Siu, Yim Ling, 2018. "Land expropriation compensation among multiple stakeholders in a mining area: Explaining “skeleton house” compensation," Land Use Policy, Elsevier, vol. 74(C), pages 97-110.
    8. Gong, Cynthia M. & Lizieri, Colin & Bao, Helen X.H., 2019. "“Smarter information, smarter consumers”? Insights into the housing market," Journal of Business Research, Elsevier, vol. 97(C), pages 51-64.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Basu, Amita & Srinivasan, Narayanan, 2021. "A Modified Contingent Valuation Method Shrinks Gain-Loss Asymmetry," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 94(C).
    2. John K. Horowitz & Kenneth E. McConnell & James J. Murphy, 2013. "Behavioral foundations of environmental economics and valuation," Chapters, in: John A. List & Michael K. Price (ed.), Handbook on Experimental Economics and the Environment, chapter 4, pages 115-156, Edward Elgar Publishing.
    3. William S. Neilson & Michael McKee & Robert P. Berrens, 2013. "Value and outcome uncertainty as explanations for the WTA vs WTP disparity," Chapters, in: John A. List & Michael K. Price (ed.), Handbook on Experimental Economics and the Environment, chapter 6, pages 171-189, Edward Elgar Publishing.
    4. Drayer, Joris & Shapiro, Stephen L., 2011. "An examination into the factors that influence consumers’ perceptions of value," Sport Management Review, Elsevier, vol. 14(4), pages 389-398.
    5. Sayman, Serdar & Onculer, Ayse, 2005. "Effects of study design characteristics on the WTA-WTP disparity: A meta analytical framework," Journal of Economic Psychology, Elsevier, vol. 26(2), pages 289-312, April.
    6. Richard Carson & Nicholas Flores & Norman Meade, 2001. "Contingent Valuation: Controversies and Evidence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 19(2), pages 173-210, June.
    7. Banzhaf, H. Spencer, 2016. "Constructing markets: environmental economics and the contingent valuation controversy," MPRA Paper 78814, University Library of Munich, Germany.
    8. José L Oviedo & Pablo Campos & Alejandro Caparrós, 2022. "Contingent valuation of landowner demand for forest amenities: application in Andalusia, Spain," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 49(3), pages 615-643.
    9. Christina McGranaghan & Steven G. Otto, 2022. "Choice uncertainty and the endowment effect," Journal of Risk and Uncertainty, Springer, vol. 65(1), pages 83-104, August.
    10. Manuel Frondel & Stephan Sommer & Lukas Tomberg, 2021. "WTA-WTP Disparity: The Role of Perceived Realism of the Valuation Setting," Land Economics, University of Wisconsin Press, vol. 97(1), pages 196-206.
    11. 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.
    12. Richard T. Carson & Miko_aj Czajkowski, 2014. "The discrete choice experiment approach to environmental contingent valuation," Chapters, in: Stephane Hess & Andrew Daly (ed.), Handbook of Choice Modelling, chapter 9, pages 202-235, Edward Elgar Publishing.
    13. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
    14. Nathalie Havet & Magali Morelle & Alexis Penot & Raphaël Remonnay, 2012. "The information content of the WTP-WTA gap : An empirical analysis among severely ill patients," Working Papers halshs-00697762, HAL.
    15. Mark Tocock & Dugald Tinch & Darla Hatton MacDonald & John M. Rose, 2023. "Managing the energy trilemma of reliability, affordability and renewables: Assessing consumer demands with discrete choice experiments," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(2), pages 155-175, April.
    16. Breffle, William S. & Eiswerth, Mark E. & Muralidharan, Daya & Thornton, Jeffrey, 2015. "Understanding how income influences willingness to pay for joint programs: A more equitable value measure for the less wealthy," Ecological Economics, Elsevier, vol. 109(C), pages 17-25.
    17. Richard T. Carson, 2011. "Contingent Valuation," Books, Edward Elgar Publishing, number 2489.
    18. Susan Chilton & Michael Jones-Lee & Rebecca McDonald & Hugh Metcalf, 2012. "Does the WTA/WTP ratio diminish as the severity of a health complaint is reduced? Testing for smoothness of the underlying utility of wealth function," Journal of Risk and Uncertainty, Springer, vol. 45(1), pages 1-24, August.
    19. Darla Hatton MacDonald & Mark Morrison & Mary Barnes, 2010. "Willingness to Pay and Willingness to Accept Compensation for Changes in Urban Water Customer Service Standards," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 24(12), pages 3145-3158, September.
    20. Whynes, David K. & Sach, Tracey H., 2007. "WTP and WTA: Do people think differently?," Social Science & Medicine, Elsevier, vol. 65(5), pages 946-957, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:urbstu:v:51:y:2014:i:2:p:412-427. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.gla.ac.uk/departments/urbanstudiesjournal .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.