Two Experiments on the Difference between Willingness to Pay and Willingness to Accept

"Willingness to pay" (WTP) and "willingness to accept" (WTA) measures of welfare change typically differ substantially when elicited from surveys or market transactions. This finding is contrary to the expectations of standard economic theory which suggests that these two measures should be relatively similar in magnitude. Several possible explanations for this anomaly are reviewed. This study focuses on one explanation, that the availability of substitutes for the good being evaluated affects the difference between the two measures. Two experiments are conducted. First, a contingent valuation survey valuing movie tickets is administered to classes of university students. Second, the results of a survey of big game hunters are examined for evidence supporting various hypotheses on the nature of the divergence between WTP and WTA. It is concluded that there is little, if any, evidence of the availability of substitutes affecting WTP-WTA differences.

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Staff Paper

 Record created 2017-04-01, last modified 2017-04-26

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