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The Wtp/Wta Disparity: Have We Been Observing Dynamic Values But Interpreting Them As Static?

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Listed:
  • Kling, Catherine L.
  • List, John A.
  • Zhao, Jinhua

Abstract

This study advances, and experimentally tests, a new explanation for the disparity between willingness to pay (WTP) and willingness to accept (WTA)-a dynamic neoclassical theory based on the presence of commitment costs. While to date neoclassical models have not explained the observed data patterns well, we find that the commitment cost theory is able to explain adequately the causes and severity of the WTP/WTA value disparity. In particular, using data gathered from an actual marketplace, even the most stringent of our theoretical conjectures-cases where WTP values are predicted to exceed WTA values-oftentimes are met.

Suggested Citation

Handle: RePEc:ags:hebarc:18595
DOI: 10.22004/ag.econ.18595
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