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WTA-WTP Disparity: The Role of Perceived Realism of the Valuation Setting

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  • Manuel Frondel
  • Stephan Sommer
  • Lukas Tomberg

Abstract

Based on a survey of more than 5,000 German households and a single-binary-choice experiment in which we randomly split the respondents into two groups, this article explores both households’ willingness to pay (WTP) for power supply security and their willingness to accept (WTA) compensation for a reduced security level. In accordance with numerous empirical studies, we find that the mean WTA value substantially exceeds the mean WTP value in our empirical example by a factor of 3.56. Yet, the WTA-WTP ratio decreases to 2.35 if respondents believe that the hypothetical valuation setting is likely to become true.

Suggested Citation

  • Manuel Frondel & Stephan Sommer & Lukas Tomberg, 2021. "WTA-WTP Disparity: The Role of Perceived Realism of the Valuation Setting," Land Economics, University of Wisconsin Press, vol. 97(1), pages 196-206.
    • Handle: RePEc:uwp:landec:v:97:y:2021:i:1:p:196-206
    Note: DOI: 10.3368/wple.97.1.030419-0033R1
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    3. Simora, Michael & Frondel, Manuel & Vance, Colin, 2020. "Do financial incentives increase the acceptance of power lines? Evidence from Germany," Regional Science and Urban Economics, Elsevier, vol. 85(C).
    4. Bernadeta Gołębiowska, 2020. "Preferences for demand side management—a review of choice experiment studies," Working Papers 2020-05, Faculty of Economic Sciences, University of Warsaw.

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    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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