Value learning and the willingness to accept–willingness to pay disparity
The assumption that individual preferences are rational and consistent with standard economic theory is often appropriate, but may be optimistic if consumers are uncertain about either their preferences or how the market operates. Both sources of uncertainty may present themselves in lab experiments exploring the well-known disparity between individuals’ willingness to accept and willingness to pay. This paper explores the role of value uncertainty in the observed disparity, and finds that providing subjects with a value learning opportunity can reduce the value disparity to insignificance.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Jacinto Braga & Chris Starmer, 2005. "Preference Anomalies, Preference Elicitation and the Discovered Preference Hypothesis," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 32(1), pages 55-89, 09.
- Scott J. Savage & Donald M. Waldman, 2008. "Learning and fatigue during choice experiments: a comparison of online and mail survey modes," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(3), pages 351-371.
- David C. Kingsley & Thomas C. Brown, 2012. "Does prompting for revision influence subjects' offers in willingness to accept – willingness to pay lab experiments?," Economics Bulletin, AccessEcon, vol. 32(3), pages 2580-2585.
- John A. List & Jason F. Shogren, 1999. "Price Information and Bidding Behavior in Repeated Second-Price Auctions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 942-949.
- Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December.
- 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.
- Charles R. Plott & Kathryn Zeiler, 2007. "Exchange Asymmetries Incorrectly Interpreted as Evidence of Endowment Effect Theory and Prospect Theory?," American Economic Review, American Economic Association, vol. 97(4), pages 1449-1466, September.
- Wang, Hua, 1997. "Treatment of "Don't-Know" Responses in Contingent Valuation Surveys: A Random Valuation Model," Journal of Environmental Economics and Management, Elsevier, vol. 32(2), pages 219-232, February.
- 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.
- Brown, Thomas C. & Kingsley, David & Peterson, George L. & Flores, Nicholas E. & Clarke, Andrea & Birjulin, Andrej, 2008. "Reliability of individual valuations of public and private goods: Choice consistency, response time, and preference refinement," Journal of Public Economics, Elsevier, vol. 92(7), pages 1595-1606, July.
- Graham Loomes & Chris Starmer & Robert Sugden, 2003.
"Do Anomalies Disappear in Repeated Markets?,"
Royal Economic Society, vol. 113(486), pages C153-C166, March.
- Swait, Joffre & Adamowicz, Wiktor, 2001. " The Influence of Task Complexity on Consumer Choice: A Latent Class Model of Decision Strategy Switching," Journal of Consumer Research, University of Chicago Press, vol. 28(1), pages 135-48, June.
- Shogren, Jason F. & Cho, Sungwon & Koo, Cannon & List, John & Park, Changwon & Polo, Pablo & Wilhelmi, Robert, 2001. "Auction mechanisms and the measurement of WTP and WTA," Resource and Energy Economics, Elsevier, vol. 23(2), pages 97-109, April.
- Kolstad, Charles D. & Guzman, Rolando M., 1999. "Information and the Divergence between Willingness to Accept and Willingness to Pay," Journal of Environmental Economics and Management, Elsevier, vol. 38(1), pages 66-80, July.
- DeShazo, J. R. & Fermo, German, 2002. "Designing Choice Sets for Stated Preference Methods: The Effects of Complexity on Choice Consistency," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 123-143, July.
- List, John A., 2004.
"Substitutability, experience, and the value disparity: evidence from the marketplace,"
Journal of Environmental Economics and Management,
Elsevier, vol. 47(3), pages 486-509, May.
- John List, 2004. "Substitutability, experience, and the value disparity: Evidence from the marketplace," Framed Field Experiments 00175, The Field Experiments Website.
- John List, 2003.
"Does market experience eliminate market anomalies?,"
Natural Field Experiments
00297, The Field Experiments Website.
- John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 41-71, February.
- Li Chuan-Zhong & Mattsson Leif, 1995. "Discrete Choice under Preference Uncertainty: An Improved Structural Model for Contingent Valuation," Journal of Environmental Economics and Management, Elsevier, vol. 28(2), pages 256-269, March.
- Bateman, Ian J, et al, 1997. "A Test of the Theory of Reference-Dependent Preferences," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 479-505, May.
- 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.
- Randall, Alan & Stoll, John R, 1980. "Consumer's Surplus in Commodity Space," American Economic Review, American Economic Association, vol. 70(3), pages 449-55, June.
- Dirk Engelmann & Guillaume Hollard, 2010. "Reconsidering the Effect of Market Experience on the “Endowment Effect”," Econometrica, Econometric Society, vol. 78(6), pages 2005-2019, November.
- Thomas P. Holmes & Kevin J. Boyle, 2005. "Dynamic Learning and Context-Dependence in Sequential, Attribute-Based, Stated-Preference Valuation Questions," Land Economics, University of Wisconsin Press, vol. 81(1).
- Dubourg, W R & Jones-Lee, M W & Loomes, Graham, 1997. "Imprecise Preferences and Survey Design in Contingent Valuation," Economica, London School of Economics and Political Science, vol. 64(256), pages 681-702, November.
- David C. Kingsley & Thomas C. Brown, 2010. "Preference Uncertainty, Preference Learning, and Paired Comparison Experiments," Land Economics, University of Wisconsin Press, vol. 86(3).
- 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.
When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:120:y:2013:i:3:p:473-476. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.