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The Endowment Effect and WTA: A Quasi-Experimental Test

Author

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  • MacDonald, H.F.
  • Bowker, J.M.

Abstract

This paper reports a test of the endowment effect in an economic analysis of localized air pollution. Regression techniques are used to test the significance of perceived property rights on household WTP for improved air quality versus WTA compensation to forgo an improvement in air quality. Our experiment contributes to the research into the WTP/WTA divergence by providing a new basis for supporting the existence of an endowment effect. Our results are in contrast to recent work by Shogren et al. which supports the substitution proposition of Hanemann while rejecting the endowment effect.

Suggested Citation

  • MacDonald, H.F. & Bowker, J.M., 1994. "The Endowment Effect and WTA: A Quasi-Experimental Test," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 26(2), pages 545-551, December.
    • Handle: RePEc:cup:jagaec:v:26:y:1994:i:02:p:545-551_02
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    Cited by:

    1. William S. Neilson & Michael McKee & Robert P. Berrens, 2013. "Value and outcome uncertainty as explanations for the WTA vs WTP disparity," Chapters, in: John A. List & Michael K. Price (ed.), Handbook on Experimental Economics and the Environment, chapter 6, pages 171-189, Edward Elgar Publishing.
    2. Shogren, Jason F., 2006. "Experimental Methods and Valuation," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 19, pages 969-1027, Elsevier.
    3. Liu, Runqiu & Jiang, Jian & Yu, Chao & Rodenbiker, Jesse & Jiang, Yongmu, 2021. "The endowment effect accompanying villagers' withdrawal from rural homesteads: Field evidence from Chengdu, China," Land Use Policy, Elsevier, vol. 101(C).
    4. Brown, Thomas C. & Gregory, Robin, 1999. "Why the WTA-WTP disparity matters," Ecological Economics, Elsevier, vol. 28(3), pages 323-335, March.
    5. Aabo, Svanhild, 2005. "Valuing the benefits of public libraries," Information Economics and Policy, Elsevier, vol. 17(2), pages 175-198, March.

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