Resource title

An Experimental Investigation of the Disparity between WTA and WTP for Lotteries

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Resource description

In this paper we experimentally investigate the disparity between willingness-to-accept (WTA) and willingness-to-pay (WTP) for risky lotteries. The direction of the income effect is reversed by endowing subjects with the highest price of a lottery when asking the WTP question. Our results show that the income effect is too small to be the only source of the disparity. Since the disparity concentrates on a subsample of subjects, parametric and nonparametric tests of the WTA-WTP ratio may lead to contradictory results. The disparity is significantly reduced when background risk is introduced. That is, putting subjects always into a risky position could improve the contingent valuation method which is often concerned with the assessment of risky situations such as health risks, automobile safety, etc.

Resource author

Stefan Traub, Ulrich Schmidt

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Resource publish date

Resource language

eng

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text/html

Resource resource URL

http://hdl.handle.net/10419/22014

Resource license

Adapt according to the presented license agreement and reference the original author.