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Loss of Substitutability: A Note On Disparity between WTP and WTA / Perte de la Substituabilité

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  • Arnaud Dragicevic

Abstract

This paper focuses on the disparity between willingness-to-pay and willingness-to-accept indices in nonmarket valuation. The substitution effect makes agents value net losses higher than opportunity losses. In regard to net losses, we show that imperfect substitutability respectively induces infinite and finite compensation demanded in the neoclassical framework and loss aversion. Consequently, the models translate net losses in a different way Ce papier traite de la disparité entre les indices de consentement-à-payer et consentement-à-recevoir dans l'évaluation hors-marché. En raison de l'effet de substitution, les pertes sèches sont plus valorisées que les coûts d'opportunité. A l'égard des pertes sèches, nous montrons que la substituabilité imparfaite induit un consentement-à-recevoir respectivement infini et fini dans les modèles néoclassique et d'aversion aux pertes. Dès lors, la notion de perte sèche est différemment abordée dans les deux modèles.

Suggested Citation

  • Arnaud Dragicevic, 2010. "Loss of Substitutability: A Note On Disparity between WTP and WTA / Perte de la Substituabilité," CIRANO Working Papers 2010s-03, CIRANO.
  • Handle: RePEc:cir:cirwor:2010s-03
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    File URL: http://www.cirano.qc.ca/files/publications/2010s-03.pdf
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    Keywords

    WTP-WTA disparity; substitution effect; loss aversion; disparité CAP-CAR; effet de substitution; aversion aux pertes;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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