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An experimental analysis of impacts of uncertainty and irreversibility on willingness-to-pay

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  • Murat Isik
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    Abstract

    Several empirical studies demonstrated large discrepancies between willingness-to-accept and willingness-to-pay measures. This paper uses an experimental method to determine the extent to which uncertainty about the value of the environmental improvement and the irreversibility of the decision affects the willingness-to-pay to preserve an endangered species. The results show that risk preferences, uncertainty about environmental improvements, and irreversibility significantly influence the willingness-to-pay measure. These results have implications for design and implementation of contingent valuation surveys.

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    File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/135054850500119203&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

    Volume (Year): 13 (2006)
    Issue (Month): 2 ()
    Pages: 67-72

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    Handle: RePEc:taf:apeclt:v:13:y:2006:i:2:p:67-72

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    1. Magnus Johannesson & Bengt Liljas & Per-Olov Johansson, 1998. "An experimental comparison of dichotomous choice contingent valuation questions and real purchase decisions," Applied Economics, Taylor & Francis Journals, vol. 30(5), pages 643-647.
    2. Gwendolyn Morrison, 1997. "Willingness to pay and willingness to accept: some evidence of an endowment effect," Applied Economics, Taylor & Francis Journals, vol. 29(4), pages 411-417.
    3. Peter Frykblom, 2000. "Willingness to pay and the choice of question format: experimental results," Applied Economics Letters, Taylor & Francis Journals, vol. 7(10), pages 665-667.
    4. G. Cornelis van Kooten & Emina Krcmar & Erwin H. Bulte, 2001. "Preference Uncertainty in Non-Market Valuation: A Fuzzy Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 487-500.
    5. Peter A. Diamond & Jerry A. Hausman, 1994. "Contingent Valuation: Is Some Number Better than No Number?," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 45-64, Fall.
    6. Anabela Botelho & Ligia Costa Pinto, 2002. "Hypothetical, real, and predicted real willingness to pay in open-ended surveys: experimental results," Applied Economics Letters, Taylor & Francis Journals, vol. 9(15), pages 993-996.
    7. Massimo Paradiso & Antonella Trisorio, 2001. "The effect of knowledge on the disparity between hypothetical and real willingness to pay," Applied Economics, Taylor & Francis Journals, vol. 33(11), pages 1359-1364.
    8. Magnus Johannesson & Bengt Liljas & Richard O'Conor, 1997. "Hypothetical versus real willingness to pay: some experimental results," Applied Economics Letters, Taylor & Francis Journals, vol. 4(3), pages 149-151.
    9. 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.
    10. Johannesson, Magnus, et al, 1999. "Calibrating Hypothetical Willingness to Pay Responses," Journal of Risk and Uncertainty, Springer, vol. 18(1), pages 21-32, April.
    11. 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 635-47, June.
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