Investigating Willingness to Pay–Willingness to Accept Asymmetry in Choice Experiments

Lanz, Bruno, Provins, Allan, Bateman, Ian J., Scarpa, Riccardo, Willis, Ken G. and Ozdemiroglu, Ece (2010) Investigating Willingness to Pay–Willingness to Accept Asymmetry in Choice Experiments. In: Choice Modelling: The State of the Art and the State of Practice. Emerald Group Publishing Ltd., pp. 517-542. ISBN 978-1-84950-772-1

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We investigate discrepancies between willingness to pay (WTP) and willingness to accept (WTA) in the context of a stated choice experiment. Using data on customer preferences for water services where respondents were able to both ‘sell’ and ‘buy’ the choice experiment attributes, we find evidence of non-linearity in the underlying utility function even though the range of attribute levels is relatively small. Our results reveal the presence of significant loss aversion in all the attributes, including price. We find the WTP–WTA schedule to be asymmetric around the current provision level and that the WTP–WTA ratio varies according to the particular provision change under consideration. Such reference point findings are of direct importance for practitioners and decision-makers using choice experiments for economic appraisal such as cost–benefit analysis, where failure to account for non-linearity in welfare estimates may significantly over- or under-state individual's preferences for gains and avoiding losses respectively.

Item Type: Book Section
Faculty \ School: Faculty of Science > School of Environmental Sciences
UEA Research Groups: Faculty of Science > Research Centres > Centre for Social and Economic Research on the Global Environment (CSERGE)
Faculty of Science > Research Groups > Resources, Sustainability and Governance (former - to 2018)
Faculty of Social Sciences > Research Centres > Centre for Behavioural and Experimental Social Sciences
Depositing User: Rachel Snow
Date Deposited: 18 Feb 2011 11:56
Last Modified: 24 Jul 2024 10:30
DOI: 10.1108/9781849507738-024

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