THE WTP/WTA DISPARITY: HAVE WE BEEN OBSERVING DYNAMIC VALUES BUT INTERPRETING THEM AS STATIC?

Catherine L. Kling, John A. List and Jinhua Zhao

No 18595, Hebrew University of Jerusalem Archive from Hebrew University of Jerusalem

Abstract: This study advances, and experimentally tests, a new explanation for the disparity between willingness to pay (WTP) and willingness to accept (WTA)-a dynamic neoclassical theory based on the presence of commitment costs. While to date neoclassical models have not explained the observed data patterns well, we find that the commitment cost theory is able to explain adequately the causes and severity of the WTP/WTA value disparity. In particular, using data gathered from an actual marketplace, even the most stringent of our theoretical conjectures-cases where WTP values are predicted to exceed WTA values-oftentimes are met.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Pages: 28
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:ags:hebarc:18595

DOI: 10.22004/ag.econ.18595

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