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How Do Landowners Price their Lands during Land Expropriation and the Motives Behind It: An Explanation from a WTA/WTP Experiment in Central Beijing

Zhongyu He and Yasushi Asami

Urban Studies, 2014, vol. 51, issue 2, 412-427

Abstract: Compensation paid to property owners for land expropriation is always a controversial topic, partly due to the difficulty in revealing households’ true valuation of their housing. This paper estimates and discusses the widely observed ‘willingness to accept–willingness to pay’ (WTA–WTP) gap for surveyed residents of their own houses during land expropriation. By testing several hypotheses interpreting the WTA–WTP disparity from previous studies, the paper tries to establish the incentive for households’ decision-making. The paper employs a contingent valuation method with data from 315 household interviews in central Beijing, China. The paper reports an average WTA/WTP ratio of 3.74 and reaches the conclusion that in our case the high compensation required by property owners largely derives from opportunistic pricing behaviour rather than sentimental attachment to the dwellings that is unobservable in the market price, and that the WTA of the residents is intentionally overpriced.

Date: 2014
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Handle: RePEc:sae:urbstu:v:51:y:2014:i:2:p:412-427