Measuring the Willingness to Pay to Avoid Guilt: Estimation Using Equilibrium and Stated Belief Models

Charles Bellemare (), Alexander Sebald () and Martin Strobel

No 4803, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We estimate structural models of guilt aversion to measure the population level of willingness to pay (WTP) to avoid feeling guilt by letting down another player. We compare estimates of WTP under the assumption that higher-order beliefs are in equilibrium (i.e. consistent with the choice distribution) with models estimated using stated beliefs which relax the equilibrium requirement. We estimate WTP in the later case by allowing stated beliefs to be correlated with guilt aversion, thus controlling for a possible source of a consensus effect. All models are estimated using data from an experiment of proposal and response conducted with a large and representative sample of the Dutch population. Our range of estimates suggests that responders are willing to pay between 0.40 and 0.80 Euro to avoid letting down proposers by 1 Euro. Furthermore, we find that WTP estimated using stated beliefs is substantially overestimated (by a factor of two) when correlation between preferences and beliefs is not controlled for. Finally, we find no evidence that WTP is significantly related to the observable socio-economic characteristics of players.

Keywords: equilibrium and stated beliefs models; willingness to pay; guilt aversion (search for similar items in EconPapers)
JEL-codes: C93 D63 D84 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2010-03
New Economics Papers: this item is included in nep-cbe, nep-dcm, nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published - published in: Journal of Applied Econometrics, 2011, 26 (3), 437-453

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Related works:
Journal Article: Measuring the willingness to pay to avoid guilt: estimation using equilibrium and stated belief models (2011)
Working Paper: Measuring the Willingness to Pay to Avoid Guilt: Estimation using Equilibrium and Stated Belief Models (2010)
Working Paper: Measuring the Willingness to Pay to Avoid Guilt: Estimation using Equilibrium ad Stated Belief Models (2010)
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