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Property Consciousness And The Difference Between Wtp And Wta

Listed author(s):
  • Rahul Shastri

    (National Akademi of Development)

It is well known in Environmental Economics that payment offered on the Willingness to Pay (WTP) principle is much smaller than the compensation demanded on the Willingness to Accept (WTA) principle. Payment under WTP goes into the environment and is communally enjoyed, whereas compensation under WTA goes into one’s bank account. Public goods/benefits are valued less than private goods/benefits, due to technical reasons, as well as ‘pure property consciousness’. This explains why WTP is much less than WTA. It is suggested here that the ratio of WTP to WTA can be taken as an index of socialisation of property consciousness. A value of zero would indicate complete individualism, while a value of 1 would indicate an indifference between public and private forms of enjoyment of environmental benefits. It is interesting to note that this ratio is generally less than ½, (95% confidence interval: 0.8 £ q £ 0.38). The measure has a wide range of application. It can be derived from the difference in valuation of any quasi public good that can also be privately supplied and enjoyed. And its measurement may throw light on the failures and successes of co- operative/public/collective property based experiments.

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Paper provided by EconWPA in its series Public Economics with number 0504001.

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Length: 4 pages
Date of creation: 04 Apr 2005
Handle: RePEc:wpa:wuwppe:0504001
Note: Type of Document - pdf; pages: 4
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