THE WTP/WTA DISPARITY: HAVE WE BEEN OBSERVING DYNAMIC VALUES BUT INTERPRETING THEM AS STATIC?

This study advances, and experimentally tests, a new explanation for the disparity between willingness to pay (WTP) and willingness to accept (WTA)-a dynamic neoclassical theory based on the presence of commitment costs. While to date neoclassical models have not explained the observed data patterns well, we find that the commitment cost theory is able to explain adequately the causes and severity of the WTP/WTA value disparity. In particular, using data gathered from an actual marketplace, even the most stringent of our theoretical conjectures-cases where WTP values are predicted to exceed WTA values-oftentimes are met.


Issue Date:
2003
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/18595
Total Pages:
28
Series Statement:
CARD Working Paper 03-WP 333




 Record created 2017-04-01, last modified 2017-08-24

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