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Willingness to Accept, Willingness to Pay, and Loss Aversion

Author

Listed:
  • Jonathan Chapman
  • Mark Dean
  • Pietro Ortoleva
  • Erik Snowberg
  • Colin Camerer

Abstract

We use four incentivized representative surveys to study the endowment effect for lotteries in 4,000 U.S. adults. We replicate the standard finding of an endowment effect—the divergence between Willingness to Accept (WTA) and Willingness to Pay (WTP), but document three new findings. First, we find little evidence that the endowment effect is related to loss aversion for risky prospects, counter to predictions of popular theories in economics. Second, WTA and WTP not only diverge, but are, at best, weakly correlated. Third, WTA and WTP strongly relate to other aspects of risk preferences. The structure of these behaviors points to different theories of the endowment effect.

Suggested Citation

  • Jonathan Chapman & Mark Dean & Pietro Ortoleva & Erik Snowberg & Colin Camerer, 2023. "Willingness to Accept, Willingness to Pay, and Loss Aversion," CESifo Working Paper Series 10200, CESifo.
    • Handle: RePEc:ces:ceswps:_10200
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    References listed on IDEAS

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    1. John A. List, 2011. "Does Market Experience Eliminate Market Anomalies? The Case of Exogenous Market Experience," American Economic Review, American Economic Association, vol. 101(3), pages 313-317, May.
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    Cited by:

    1. Chen, Haojie & Zhang, Tong & Costanza, Robert & Kubiszewski, Ida & Sloggy, Matthew R. & Wu, Luhua & Luo, Haohan, 2025. "Assessing individual and social values of cultural services of a protected area through online deliberation," Ecological Economics, Elsevier, vol. 235(C).
    2. Taisuke Imai & Klaus Schmidt, 2023. "Loss Aversion," Rationality and Competition Discussion Paper Series 461, CRC TRR 190 Rationality and Competition.
    3. Taisuke Imai & Klaus M. Schmidt, 2023. "Loss Aversion," ISER Discussion Paper 1218, Institute of Social and Economic Research, The University of Osaka.
    4. Changkuk Im, 2023. "Accurate Quality Elicitation in a Multi-Attribute Choice Setting," Papers 2309.00114, arXiv.org, revised Dec 2023.

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    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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