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Does Uncertainty Affect the Divergence between WTP and WTA Measures?

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  • Murat Isik

    (University of Idaho)

Abstract

Many empirical studies have demonstrated large discrepancies between willingness to accept (WTA) and willingness to pay (WTP) measures. This paper examines the extent to which uncertainty about the environmental quality improvement can lead to a divergence between WTP and WTA measures. Indirect utility function parameters and uncertainty about the environmental quality change affect the extent to which WTP and WTA measures can differ. These results have implications for design and implementation of contingent valuation surveys.

Suggested Citation

  • Murat Isik, 2004. "Does Uncertainty Affect the Divergence between WTP and WTA Measures?," Economics Bulletin, AccessEcon, vol. 4(1), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-03d80011
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    References listed on IDEAS

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    1. Jack L. Knetsch & J. A. Sinden, 1984. "Willingness to Pay and Compensation Demanded: Experimental Evidence of an Unexpected Disparity in Measures of Value," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(3), pages 507-521.
    2. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-1348, December.
    3. Peter A. Diamond & Jerry A. Hausman, 1994. "Contingent Valuation: Is Some Number Better than No Number?," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 45-64, Fall.
    4. Hanemann, W Michael, 1991. "Willingness to Pay and Willingness to Accept: How Much Can They Differ?," American Economic Review, American Economic Association, vol. 81(3), pages 635-647, June.
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    Citations

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    Cited by:

    1. Hanying Zhang & Jiafen Li & Jinlong Shen & Jianfeng Song, 2022. "Measurement of Supply-and Demand-Side Endowment Effects and Analysis of Their Influencing Factors in Agricultural Land Transfer," Land, MDPI, vol. 11(11), pages 1-21, November.
    2. Erik Maier & Robert Wilken & Florian Dost, 2015. "The double benefits of consumer certainty: combining risk and range effects," Marketing Letters, Springer, vol. 26(4), pages 473-488, December.
    3. Rodolfo M. Nayga, Jr. & Wipon Aiew & Richard Woodward, 2005. "Experiments on the Divergence between Willingness to Pay and Willingness to Accept: The Issue Revisited," Economics Bulletin, AccessEcon, vol. 17(4), pages 1-5.
    4. Athukorala, Wasantha, 2013. "Health Benefits and Industrial Air Pollution: A Comparison between People’s Willingness to Accept and the Opportunity Cost of Health Risk," Sri Lankan Journal of Agricultural Economics, Sri Lanka Agricultural Economics Association (SAEA), vol. 14, pages 1-17.
    5. Erica Mina Okada, 2010. "Uncertainty, Risk Aversion, and WTA vs. WTP," Marketing Science, INFORMS, vol. 29(1), pages 75-84, 01-02.
    6. Caswell, Julie A. & Joseph, Siny, 2007. "Consumer Demand for Quality: Major Determinant for Agricultural and Food Trade in the Future?," Working Paper Series 7390, University of Massachusetts, Amherst, Department of Resource Economics.
    7. Li, Changqing & Lu, Jian, 2018. "R&D, financing constraints and export green-sophistication in China," China Economic Review, Elsevier, vol. 47(C), pages 234-244.
    8. Douglas D. Davis & Robert J. Reilly, 2012. "On Uncertainty and the WTA-WTP Gap," Economics Bulletin, AccessEcon, vol. 32(3), pages 2594-2605.
    9. Ziwei Cong & Jia Liu & Puneet Manchanda, 2021. "The Role of "Live" in Livestreaming Markets: Evidence Using Orthogonal Random Forest," Papers 2107.01629, arXiv.org, revised Sep 2022.
    10. Robert Reilly & Douglas Davis, 2015. "The effects of uncertainty on the WTA–WTP gap," Theory and Decision, Springer, vol. 78(2), pages 261-272, February.

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    More about this item

    Keywords

    commitment cost;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General

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