A Dynamic Explanation Of The Willingness To Pay And Willingness To Accept Disparity
Evidence from laboratory experiments suggests that important disparities exist between willingness to pay (WTP) and compensation demanded for the same good. This study advances, and experimentally tests, a new explanation of the WTP/WTA disparity--a dynamic theory based on the presence of commitment costs. We find that the commitment cost theory combined with a simple behavioral anomaly is able to lend insights into the causes and severity of the WTA/WTP disparity. Further, we find that market experience attenuates the behavioral anomaly, consistent with the notion that no value disparity exists for agents with sufficient market experience.
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Volume (Year): 51 (2013)
Issue (Month): 1 (01)
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Zhao, Jinhua & Kling, Catherine L., 2001. "A new explanation for the WTP/WTA disparity," Economics Letters, Elsevier, vol. 73(3), pages 293-300, December.
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- Jinhua Zhao & Catherine L. Kling, 2000.
"Willingness-to-Pay, Compensating Variation, and the Cost of Commitment,"
Center for Agricultural and Rural Development (CARD) Publications
00-wp251, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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