On the Relation between Willingness to Accept and Willingness to Pay

Jonathan Chapman, Mark Dean, Pietro Ortoleva, Erik Snowberg and Colin Camerer (camerer@caltech.edu)
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Jonathan Chapman: NYUAD
Mark Dean: Columbia University
Pietro Ortoleva: Princeton University
Erik Snowberg: UBC, CESifo, NBER

Working Papers from Princeton University. Economics Department.

Abstract: A vast literature documents that willingness to pay (WTP) is less than willingness to accept (WTA) a monetary amount for an object, a phenomenon called the endowment effect. Using data from three incentivized studies with a total representative sample of 4,000 U.S. adults, we add one additional finding: WTA and WTP for a lottery are (essentially) uncorrelated. In contrast, independent measures of WTA (or WTP) are highly correlated, and relatively stable across time. Leading models of reference dependent preferences are compatible with a zero correlation between WTA and WTP, but only for specific parameterizations and ruling out popular special cases. These models also predict a relationship between the endowment effect and loss aversion, which we do not find.

Keywords: Willingness To Pay; Willingness To Accept; Endowment Effect; Loss Aversion (search for similar items in EconPapers)
JEL-codes: C90 D81 D91 (search for similar items in EconPapers)
Date: 2021-05
New Economics Papers: this item is included in nep-ban, nep-cbe, nep-dcm, nep-env and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pri:econom:2021-90

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