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Isoni, Andrea
Year of Publication: 
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CSERGE Working Paper EDM 09-06
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.
WTA/WTP disparity
price sensitivity
bad-deal aversion
loss aversion
Document Type: 
Working Paper
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