Resolving Differences in Willingness to Pay and Willingness to Accept
This paper tests the conjecture that the divergence of willingness to pay and willingness to accept for identical goods is driven by the degree of substitution between goods. In contrast to well-known results for market goods with close substitutes (i.e., candy bars and coffee mugs), the authors' results indicate a convergence of willingness-to-pay and willingness-to-accept measures of value. However, for a nonmarket good with imperfect substitutes (i.e., reduced health risk), the divergence of willingness-to-pay and willingness-to-accept value measures is persistent, even with repeated market participation and full information on the nature of the good. Copyright 1994 by American Economic Association.
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|Date of creation:||01 Mar 1994|
|Date of revision:|
|Publication status:||Published in American Economic Review, March 1994, vol. 84 no. 1, pp. 255-270|
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