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A new meta-analysis on the WTP/WTA disparity

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  • Tunçel, Tuba
  • Hammitt, James K.

Abstract

This study reports a new meta-analysis of papers that elicit willingness-to-pay (WTP) and willingness-to-accept compensation (WTA) measures of value for the same good. We investigate the effects of type of good and several survey-design features on the WTP/WTA disparity, measured as the logarithm of the ratio of mean WTA to mean WTP. Confirming Horowitz and McConnell׳s (2002) pioneering meta-analysis, we find the disparity is smaller for ordinary private goods than for public and non-market goods, that it is not solely an artifact of using hypothetical transactions or other weak experimental or survey methods, and that it is smaller for studies using student subjects. In addition, we find that the disparity is smaller when subjects have experience valuing the good in real markets or through repeated experimental trials. In contrast to Horowitz and McConnell, we find the disparity is significantly smaller in studies using incentive-compatible elicitation mechanisms. The disparity is smaller in more recent studies, an effect that is attributable only in part to changes in study characteristics.

Suggested Citation

  • Tunçel, Tuba & Hammitt, James K., 2014. "A new meta-analysis on the WTP/WTA disparity," Journal of Environmental Economics and Management, Elsevier, vol. 68(1), pages 175-187.
  • Handle: RePEc:eee:jeeman:v:68:y:2014:i:1:p:175-187
    DOI: 10.1016/j.jeem.2014.06.001
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:eecrev:v:94:y:2017:i:c:p:240-262 is not listed on IDEAS
    2. Committee, Nobel Prize, 2017. "Richard H. Thaler: Integrating Economics with Psychology," Nobel Prize in Economics documents 2017-1, Nobel Prize Committee.
    3. Kip Viscusi, W. & Gayer, Ted, 2016. "Rational Benefit Assessment for an Irrational World: Toward a Behavioral Transfer Test," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 7(01), pages 69-91, March.
    4. Drouvelis, Michalis & Sonnemans, Joep, 2017. "The endowment effect in games," European Economic Review, Elsevier, vol. 94(C), pages 240-262.
    5. repec:eee:ecoser:v:27:y:2017:i:pa:p:70-81 is not listed on IDEAS
    6. repec:oup:ecpoli:v:32:y:2017:i:92:p:757-809. is not listed on IDEAS
    7. Jack L. Knetsch, 2016. "Reference Dependence And Other Behavioral Findings: The Likelihood Of Serious Evaluation And Policy Biases," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(03), pages 1-11, June.
    8. repec:eee:soceco:v:73:y:2018:i:c:p:40-45 is not listed on IDEAS
    9. repec:eee:ecoser:v:19:y:2016:i:c:p:32-41 is not listed on IDEAS
    10. Frondel, Manuel & Sommer, Stephan, 2017. "Der Wert von Versorgungssicherheit mit Strom: Evidenz für deutsche Haushalte," RWI Materialien 115, RWI - Leibniz-Institut für Wirtschaftsforschung.

    More about this item

    Keywords

    Willingness to pay; Willingness to accept; Stated-preference;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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