- Title
- On the Relation between Willingness to Accept and Willingness to Pay
- Author(s)
- Jonathan Chapman Jonathan Chapman (NYUAD)
- Mark Dean Mark Dean (Columbia University)
- Pietro Ortoleva Pietro Ortoleva (Princeton University)
- Erik Snowberg Erik Snowberg (UBC, CESifo, NBER)
- Colin Camerer Colin Camerer (Caltech)
- Abstract
- A vast literature documents that willingness to pay (WTP) is less than willingness to accept (WTA) a monetary amount for an object, a phenomenon called the endowment effect. Using data from three incentivized studies with a total representative sample of 4,000 U.S. adults, we add one additional finding: WTA and WTP for a lottery are (essentially) uncorrelated. In contrast, independent measures of WTA (or WTP) are highly correlated, and relatively stable across time. Leading models of reference dependent preferences are compatible with a zero correlation between WTA and WTP, but only for specific parameterizations and ruling out popular special cases. These models also predict a relationship between the endowment effect and loss aversion, which we do not find.
- Creation Date
- 2021-05
- Section URL ID
- Paper Number
- 2021-90
- URL
- http://pietroortoleva.com/papers/WTA-P.pdf
- File Function
- Jel
- C90, D81, D91
- Keyword(s)
- Willingness To Pay, Willingness To Accept, Endowment Effect, Loss Aversion
- Suppress
- false
- Series
- 13