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http://hdl.handle.net/10419/22014
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| Title: | | An Experimental Investigation of the Disparity between WTA and WTP for Lotteries  |
| Authors: | | Traub, Stefan Schmidt, Ulrich |
| Issue Date: | | 2006 |
| Series/Report no.: | | Economics working paper / Christian-Albrechts-Universität Kiel, Department of Economics 2006,09 |
| Abstract: | | In this paper we experimentally investigate the disparity between willingness-to-accept (WTA) and willingness-to-pay (WTP) for risky lotteries. The direction of the income effect is reversed by endowing subjects with the highest price of a lottery when asking the WTP question. Our results show that the income effect is too small to be the only source of the disparity. Since the disparity concentrates on a subsample of subjects, parametric and nonparametric tests of the WTA-WTP ratio may lead to contradictory results. The disparity is significantly reduced when background risk is introduced. That is, putting subjects always into a risky position could improve the contingent valuation method which is often concerned with the assessment of risky situations such as health risks, automobile safety, etc. |
| Subjects: | | WTA-WTP disparity lotteries background risk contingent valuation |
| JEL: | | C91 D81 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des IfW Economists Online Economics Working Papers, Department of Economics, CAU Kiel
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