Disparate WTA-WTP disparities: the influence of human versus natural causes

Abstract

A host of studies have shown that respondents typically provide larger values reflecting their willingness to accept compensation (WTA) for the loss of a product than amounts they would be willing to pay (WTP) to acquire the same product (Knetsch and Sniden, 1984; Cummings, Brookshire, and Schulze, 1986; Irwin, 1994). Meanwhile, other evidence indicates that causes for the deterioration or the damage of a product (either human or natural) will influence both WTA and WTP (Kahneman et al., 1993; Baron and Ritov, 1992). We conducted two experiments to determine whether human-caused versus naturally occurring events influenced disparities between WTA and WTP values. In the first experiment, residents of a Midwestern city were asked to provide WTA or WTP amounts for the removal of a street tree, either through planned city street widening or because of disease. In the second experiment, students at a large Midwestern university provided WTA and WTP amounts for two environmental scenarios: air quality and the cleanliness of a river. Results of both experiments indicate that the disparity between WTA and WTP is far greater when the damage was caused by humans. Copyright © 1999 John Wiley & Sons, Ltd.