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| Title: | | An experimental investigation of the disparity between WTA and WTP for lotteries  |
| Authors: | | Schmidt, Ulrich Traub, Stefan |
| Issue Date: | | 2009 |
| Citation: | | [Volume:] 66 [Issue:] 3 [Pages:] 229-262 [Journal:] Theory and decision [ISBN:] 0040-5833 |
| 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 |
| Persistent Identifier of the first edition: | | doi:10.1007/s11238-007-9062-2 |
| Document Type: | | Article |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des IfW Economists Online
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