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Willingness-To-Accept Versus Willingness-To-Pay Measures of Value: Implications for Rent Control, Eminent Domain, and Zoning

Author

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  • Thomas J. Miceli

    (University of Connecticut, Storrs)

  • Alanson P. Minkler

    (University of Connecticut, Storrs)

Abstract

Recent work suggests that individuals'willingness-to-accept (WA) measures of value differ from their willingness-to-pay (WP) measures of value. This divergence has been attributed to some combination of wealth and "endowment" effects. Because WA is always higher than WP, market-supported distributions across individuals that are efficient based on the WP criterion may not be efficient when using a WA criterion. The purpose of this article is to offer a positive explanation, one based on a WA measure of value, for government intervention in land-use situations. The authors achieve this with simple analysis that looks at both the divergences between a given individual's WA and WP measure of value and the different WA valuations across individuals. Significantly, they find instances in which government intervention with no efficiency basis under a WP efficiency criterion may be efficient if the standard is changed to a WA-based efficiency criterion instead.

Suggested Citation

  • Thomas J. Miceli & Alanson P. Minkler, 1995. "Willingness-To-Accept Versus Willingness-To-Pay Measures of Value: Implications for Rent Control, Eminent Domain, and Zoning," Public Finance Review, , vol. 23(2), pages 255-270, April.
    • Handle: RePEc:sae:pubfin:v:23:y:1995:i:2:p:255-270
    DOI: 10.1177/109114219502300208
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    References listed on IDEAS

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    1. Knetsch, Jack L, 1989. "The Endowment Effect and Evidence of Nonreversible Indifference Curves," American Economic Review, American Economic Association, vol. 79(5), pages 1277-1284, December.
    2. Buchanan, James M, 1987. "The Constitution of Economic Policy," American Economic Review, American Economic Association, vol. 77(3), pages 243-250, June.
    3. Hovenkamp, Herbert, 1991. "Legal Policy and the Endowment Effect," The Journal of Legal Studies, University of Chicago Press, vol. 20(2), pages 225-247, June.
    4. Eaton, B Curtis & White, William D, 1991. "The Distribution of Wealth and the Efficiency of Institutions," Economic Inquiry, Western Economic Association International, vol. 29(2), pages 336-350, April.
    5. 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.
    6. 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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    Cited by:

    1. Philip Jones & John Cullis, 2002. "Merit Want Status and Motivation: The Knight Meets the Self-Loving Butcher, Brewer, and Baker," Public Finance Review, , vol. 30(2), pages 83-101, March.
    2. Minkler, Lanse, 1999. "Legal institutions, environmental protection, and the willingness-to-accept measure of value," Ecological Economics, Elsevier, vol. 28(1), pages 99-116, January.

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