Handbook on Experimental Economics and the Environment
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Handbook on Experimental Economics and the Environment

Edited by John A. List and Michael K. Price

Laboratory and field experiments have grown significantly in prominence over the past decade. The experimental method provides randomization in key variables therefore permitting a deeper understanding of important economic phenomena. This path-breaking volume provides a valuable collection of experimental work within the area of environmental and resource economics and showcases how laboratory and field experiments can be used for both positive and normative purposes.
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Chapter 6: Value and outcome uncertainty as explanations for the WTA vs WTP disparity

William S. Neilson, Michael McKee and Robert P. Berrens


The frequently observed divergence between an individual’s maximum willingness to pay (WTP) and minimum willingness to accept compensation (WTA) for the same quantity change in a good or service has been the topic of considerable investigation and inquiry. Repeated findings from numerous survey-based contingent valuation field studies are that people report WTA and WTP values that are different, with WTA typically much higher than WTP. These results, obtained in hypothetical valuation exercises, have been corroborated by various experimental laboratory investigations using real monetary payoffs. In the field surveys studies have, for example, reported that the WTA for various types of hunting permits is four to five times higher than the corresponding WTP; and laboratory experiments that elicit values for coffee mugs, chocolate bars and lottery tickets report that WTA is approximately two to four times higher than WTP. The persistence of such disparities, across a variety of settings, has defied any single explanation and is considered a behavioral anomaly. The issue also has considerable policy implications, as in the case of natural resource damage assessment and liability cases (Brown and Gregory, 1999) as well as in civil law cases (Rachlinski and Jourden, 1998).

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