A Dynamic Explanation of the Willingness to Pay and Willingness to Accept Disparity

Catherine Kling, John List and Jinhua Zhao

No 16483, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Evidence from laboratory experiments suggests that important disparities exist between willingness to pay (WTP) and compensation demanded for the same good. This study advances, and experimentally tests, a new explanation of the WTP/WTA disparity--a dynamic theory based on the presence of commitment costs. We find that the commitment cost theory combined with a simple behavioral anomaly is able to lend insights into the causes and severity of the WTA/WTP disparity. Further, we find that market experience attenuates the behavioral anomaly, consistent with the notion that no value disparity exists for agents with sufficient market experience.

JEL-codes: C93 Q5 Q51 (search for similar items in EconPapers)
Date: 2010-10
New Economics Papers: this item is included in nep-evo, nep-exp and nep-mic
Note: EEE PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Catherine L. Kling & John A. List & Jinhua Zhao, 2013. "A Dynamic Explanation Of The Willingness To Pay And Willingness To Accept Disparity," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 909-921, 01.

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Related works:
Journal Article: A DYNAMIC EXPLANATION OF THE WILLINGNESS TO PAY AND WILLINGNESS TO ACCEPT DISPARITY (2013)
Working Paper: A Dynamic Explanation of the Willingness to Pay and Willingness to Accept Disparity (2011)
Working Paper: A Dynamic Explanation of the Willingness to Pay and Willingness to Accept Disparity (2011)
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