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Two explanations to the willingness to accept and willingness to pay gap plus an alternative

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  • Beja Jr, Edsel

Abstract

The gap between the willingness to accept and willingness to pay is the outcome of incomplete valuation. The problem therefore is more about completing the valuation procedure. The first part of the solution involves two items: one is the inclusion of the direct and indirect income effects and the other is the inclusion of the substitution effect between the numeraire good (i.e., income) and the good under consideration. The second part of the solution concerns the respective hedonic content of income, the good, and the setting. These two explanations point to a third solution that puts the setting together with the income and substitution effects.

Suggested Citation

  • Beja Jr, Edsel, 2012. "Two explanations to the willingness to accept and willingness to pay gap plus an alternative," MPRA Paper 36239, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:36239
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    File URL: https://mpra.ub.uni-muenchen.de/39171/1/MPRA_paper_39171.pdf
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    References listed on IDEAS

    as
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    3. Richard E. Lucas & Andrew Clark & Yannis Georgellis & Ed Diener, 2002. "Unemployment Alters the Set-Point for Life Satisfaction," DELTA Working Papers 2002-17, DELTA (Ecole normale supérieure).
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    6. Knetsch, Jack L., 1990. "Environmental policy implications of disparities between willingness to pay and compensation demanded measures of values," Journal of Environmental Economics and Management, Elsevier, vol. 18(3), pages 227-237, May.
    7. Kahneman, Daniel & Knetsch, Jack L., 1992. "Valuing public goods: The purchase of moral satisfaction," Journal of Environmental Economics and Management, Elsevier, vol. 22(1), pages 57-70, January.
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    9. Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-597, September.
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    More about this item

    Keywords

    Willingness to accept; willingness to pay; subjective well-being;

    JEL classification:

    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • D60 - Microeconomics - - Welfare Economics - - - General
    • A10 - General Economics and Teaching - - General Economics - - - General
    • D00 - Microeconomics - - General - - - General

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