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Title:The willingness-to-accept/willingness-to-pay disparity in repeated markets: Loss aversion or 'bad-deal' aversion? PDF Logo
Authors:Isoni, Andrea
Issue Date:2009
Series/Report no.:CSERGE working paper EDM 09-06
Abstract:Several experimental studies have reported that an otherwise robust regularity - the disparity between Willingness-To-Accept and Willingness-To-Pay - tends to be greatly reduced in repeated markets, posing a serious challenge to existing reference-dependent and reference-independent models alike. This paper offers a new account of the evidence, based on the assumptions that individuals are affected by good and bad deals relative to the expected transaction price (price sensitivity), with bad deals having a larger impact on their utility ('bad-deal'aversion). These features of preferences explain the existing evidence better than alternative approaches, including the most recent developments of loss aversion models.
Subjects:WTA/WTP disparity
price sensitivity
bad-deal aversion
reference-dependence
loss aversion
Document Type:Working Paper
Appears in Collections:CSERGE Working Papers: EDM - Environmental Decision Making, University of East Anglia

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