Real Options and the WTP/WTA Disparity
Presents a real options model of an agent's decision to purchase or sell a good under conditions of uncertainty, irreversibility, and learning over time. The agent's willingness to pay (WTP) and willingness to accept (WTA) contain both the intrinsic value of the good and an option value associated with delaying the decision until more information is available. The model explicitly demonstrates the effect that timing of an action can have on welfare measurement.
|Date of creation:||Nov 1998|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (515) 294-1183
Fax: (515) 294-6336
Web page: http://www.card.iastate.edu/Email:
More information through EDIRC
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.:
- Henry, Claude, 1974. "Investment Decisions Under Uncertainty: The "Irreversibility Effect."," American Economic Review, American Economic Association, vol. 64(6), pages 1006-12, December.
- 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.
- 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.
- Thaler, Richard, 1980. "Toward a positive theory of consumer choice," Journal of Economic Behavior & Organization, Elsevier, vol. 1(1), pages 39-60, March.
- 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.
- Zhao, Jinhua & Zilberman, David & Heiman, Amir & McWilliams, Bruce, 2002. "Modeling Money-Back Guarantees As Financial Options," Staff General Research Papers 5206, Iowa State University, Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:ias:cpaper:99-wp206. 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: ()
If references are entirely missing, you can add them using this form.