WTA-WTP Disparity Research Articles

Rarity, the WTA-WTP disparity, and price adjustments in the NFT market

Non-fungible tokens (NFTs) have become popular and are frequently traded in marketplaces. The current study examines how an NFT’s within-collection rarity influences sellers’ and buyers’ pricing and pricing dynamics. Relying on the pricing history of CryptoPunks, one of the most famous and valuable NFT collections, we find that rarity’s positive impact on willingness to accept is greater than on willingness to pay, which generates a larger pricing disparity. We further examine rarity’s impact on subsequent price adjustments and find that as rarity increases, buyers are more inclined to make greater price concessions, and sellers are reluctant to reduce their prices. Results also show that rarity’s positive impact on pricing is moderated by the NFT’s past ownership, agents’ trading experiences, and agents’ average holding periods for previous NFTs. Finally, an experiment reveals the mediating role of the focus on rarity that sellers tend to consider more about the NFT’s rarity than buyers, and therefore rarity’s positive impact on pricing is more salient for sellers than buyers.

Heterogeneity in the WTA-WTP disparity for irrigation water reliability

This paper assesses the WTP and WTA for improvements and deteriorations, respectively, in irrigation water supply reliability. The assessment relies on a double-sided discrete choice experiment valuation using latent-class modeling accounting for preference and scale heterogeneity. This valuation approach is empirically implemented using a case study of a Spanish irrigated district significantly impacted by climate change. The results obtained show individual-specific preference heterogeneity in the WTA-WTP disparity, primarily driven by the different impacts of water reliability on farmers' utility (changes in business revenues and costs, uncertainty in business performance, and farm income effects) and interindividual differences in loss aversion (different degrees of endowment effect). Additionally, the significant scale heterogeneity and ordering effects found suggest that it may be advisable to use modeling approaches that account for them. Several policy-relevant implications can be drawn, including the non-neutrality of the initial allocation of property rights, repercussions on the cost-benefit of climate change adaptation measures, and the need to account for irrigators’ preference heterogeneity in order to design successful market-based instruments.

WTA-WTP Disparity: The Role of Perceived Realism of the Valuation Setting

Based on a survey among more than 5,000 German households and a single-binary choice experiment in which we randomly split the respondents into two groups, this paper elicits both households' willingness to pay (WTP) for power supply security and their willingness to accept (WTA) compensations for a reduced security level. In accord with numerous empirical studies, we find that the mean WTA value substantially exceeds the mean WTP bid, in our empirical example by a factor of 3.56. Yet, the WTA-WTP ratio decreases to 2.35 among respondents who believe that the hypothetical valuation setting is likely to become true. Conversely, the WTA-WTP ratio increases to 3.81 among respondents who deem the setting unlikely. On the basis of these results, we conclude that inquiring about respondents' perception of the realism of the valuation setting is an easy-to-implement and promising survey element to mitigate excessive WTA-WTP disparities, particularly if private or quasi-public goods are under scrutiny.

WTA-WTP Disparity: The Role of Perceived Realism of the Valuation Setting

WTA-WTP Disparity: The Role of Perceived Realism of the Valuation Setting

WTA-WTP Disparity: The Role of Perceived Realism of the Valuation Setting

Basierend auf einer Befragung von uber 5.000 deutschen Haushalten und einem Single-Binary-Choice-Experiment, bei dem die Befragten zufallig in zwei Gruppen aufgeteilt wurden, ermittelt dieses Papier die Zahlungsbereitschaft (WTP: Willingness-to-pay) fur Stromversorgungssicherheit sowie die Bereitschaft, Entschadigungen fur eine geringere Stromversorgungssicherheit zu akzeptieren (WTA: Willingness-to-accept). In Ubereinstimmung mit zahlreichen empirischen Studien stellen wir fest, dass die mittlere Entschadigung, zu der die Befragten bereit sind, Stromausfalle zu akzeptieren, die mittlere Zahlungsbereitschaft zur Verhinderung von Stromausfallen deutlich ubersteigt, in unserem empirischen Beispiel um den Faktor 3,56. Das Verhaltnis zwischen diesen beiden Werten sinkt jedoch auf 2,35 fur Befragte, die das hypothetische Bewertungsszenario fur realistisch halten. Umgekehrt steigt dieses Verhaltnis auf 3,81 fur Befragte, die das Szenario fur unrealistisch halten. Auf Grundlage dieser Ergebnisse kommen wir zu dem Schluss, dass die Erhebung der Wahrnehmung der Befragten hinsichtlich der Realitatsnahe des Bewertungsszenarios ein einfach zu implementierendes und vielversprechendes Umfrageelement ist, um ubermasige Unterschiede zwischen WTA und WTP zu reduzieren, insbesondere wenn private oder quasi-offentliche Guter betrachtet werden.

A Differential Motivation Account for the Disparity between Willingness to Accept and Willingness to Pay

We take a motivated reasoning perspective to examine the robust finding that a seller’s willingness to accept (WTA) to give up a good is typically higher than a buyer’s willingness to pay (WTP) to obtain the good. We propose that the seller/buyer role and/or the WTA/WTP elicitation activate different motivations. Four studies, using different ways to test for motivational processes, demonstrate how motivational processes influence the WTA-WTP disparity in a predictable and systematic way. Study 1 shows that the WTA/WTP elicitation activates distinct motivations, and that altering the medium of exchange reverses the motivations. Study 2 shows that eliciting WTA/WTP using an auction mechanism activates multiple motivations, attenuating the WTA-WTP disparity. Study 3 demonstrates that activating regulatory focus that is inconsistent (vs. consistent) with the motivation activated by the WTA/WTP elicitation attenuates the WTA-WTP disparity. Study 4 demonstrates that WTA/WTP elicitation may bias perceptions of an ambiguous stimulus and that the WTA-WTP disparity increases with delay. Together, our findings provide new insights into the valuation of sellers and buyers by highlighting the role of motivational processes underlying the WTA-WTP disparity.

A Systematic Review of WTA-WTP Disparity for Dental Interventions and Implications for Cost-Effectiveness Analysis.

Cost-effectiveness analysis is widely adopted as an analytical framework to evaluate whether health care interventions represent value for money, and its use in dentistry is increasing. Traditionally, in cost-effectiveness analysis, one assumes that the decision maker’s maximum willingness to pay (WTP) for health gain is equivalent to his minimum willingness to accept (WTA) monetary compensation for health loss. It has been documented in the literature that losses are weighted higher than equivalent gains, i.e., that WTA exceeds WTP for the same health condition, resulting in a WTA/WTP ratio greater than 1. There is a knowledge gap of published WTA/WTP ratios for dental interventions in the literature. We therefore conducted a (i) systematic review of published WTA-WTP estimates in dentistry (MEDLINE, Web of Science, Cochrane Library, London, UK) and (ii) a patient-level analysis of WTA/WTP ratios of included studies, and (iii) we demonstrate the impact of a WTA-WTP disparity on cost-effectiveness analysis. Out of 55 eligible studies, two studies were included in our review. The WTA/WTP ratio ranged from 2.58 for discontinuing water fluoridation to 5.12 for mandibular implant overdentures, indicating a higher disparity for implant rehabilitations than for dental public health interventions. A WTA-WTP disparity inflates the cost-effectiveness of dental interventions when there is a substantial risk of both lower costs and health outcomes. We therefore recommend that in these cases the results of cost-effectiveness analyses are reported using different WTA/WTP ratios in a sensitivity analysis.

Valuing Healthcare Goods and Services: A Systematic Review and Meta-Analysis on the WTA-WTP Disparity.

The objective of this systematic review was to review the available evidence on the disparity between willingness to accept (WTA) and willingness to pay (WTP) for healthcare goods and services. A tiered approach consisting of (1) a systematic review, (2) an aggregate data meta-analysis, and (3) an individual participant data meta-analysis was used. MEDLINE, EMBASE, Scopus, Scisearch, and Econlit were searched for articles reporting both WTA and WTP for healthcare goods and services. Individual participant data were requested from the authors of the included studies. Thirteen papers, reporting WTA and WTP from 19 experiments/subgroups, were included in the review. The WTA/WTP ratios reported in these papers, varied from 0.60 to 4.01, with means of 1.73 (median 1.31) for 15 estimates of the mean and 1.58 (median 1.00) for nine estimates of the median. Individual data obtained from six papers, covering 71.2% of the subjects included in the review, yielded an unadjusted WTA/WTP ratio of 1.86 (95% confidence interval 1.52-2.28) and a WTA/WTP ratio adjusted for age, sex, and income of 1.70 (95% confidence interval 1.42-2.02). Income category and age had a statistically significant effect on the WTA/WTP ratio. The approach to handling zero WTA and WTP values has a considerable impact on the WTA/WTP ratio found. The results of this study imply that losses in healthcare goods and services are valued differently from gains (ratio > 1), but that the degree of disparity found depends on the method used to obtain the WTA/WTP ratio, including the approach to zero responses. Irrespective of the method used, the ratios found in our meta-analysis are smaller than the ratios found in previous meta-analyses.

Phantom limb and a new approach to understanding the WTA–WTP disparity.

Phantom limb and a new approach to understanding the WTA–WTP disparity.

Contingent Valuation Method (CVM) for Urban Restoration in the Centre of Athens

In the case of restoration of the urban environment in the centre of Athens in Greece, the author uses the Willingness to Pay (WTP) method to compute approximate external economies. The preservation/restoration of natural environment is frequently entailing excessive cost (paid by people through taxation), while it is a source of additional income for both, the state and the people, due to tourism. Since the evaluation of this good cannot be in market terms, we apply here in a modified version of the Contingent Valuation Method (CVM), which is used in Experimental Economics, in order to investigate the significance that people put on this good and how much they might be willing to pay for supporting activities concerning the preservation/restoration of the urban environment of the centre of Athens. It is proved that there is no significant linear correlation between WTP and WTA (Willingness to Accept), in spite of what is suggested in certain theoretical aspects; thus, not only the WTA-WTP disparity, reported also by some authors (in cases other than aesthetic pollution), is confirmed but, furthermore, the lack of correlation is proved.

Contingent Valuation Method (CVM) for Urban Restoration in the Centre of Athens

In the case of restoration of the urban environment in the centre of Athens in Greece, the author uses the Willingness to Pay (WTP) method to compute approximate external economies. The preservation/restoration of natural environment is frequently entailing excessive cost (paid by people through taxation), while it is a source of additional income for both, the state and the people, due to tourism. Since the evaluation of this good cannot be in market terms, we apply here in a modified version of the Contingent Valuation Method (CVM), which is used in Experimental Economics, in order to investigate the significance that people put on this good and how much they might be willing to pay for supporting activities concerning the preservation/restoration of the urban environment of the centre of Athens. It is proved that there is no significant linear correlation between WTP and WTA (Willingness to Accept), in spite of what is suggested in certain theoretical aspects; thus, not only the WTA-WTP disparity, reported also by some authors (in cases other than aesthetic pollution), is confirmed but, furthermore, the lack of correlation is proved.

Endowment effect for hedonic but not utilitarian goods

This research proposes that the WTA–WTP disparity between sellers and buyers in the endowment effect can be understood in terms of sellers' emotional attachment to the endowed item. Consistent with this hypothesis and how affective considerations are more diagnostic for hedonic than utilitarian goods, the results of an experiment indicate that the pricing disparity occurs primarily for hedonic goods. This finding explains many of the moderators that have been proffered for the endowment effect.

Introducing Neutrals: A Reinterpretation of the Endowment Effect

In behavioral economics, the endowment effect refers to the phenomenon that people usually demand higher prices to relinquish an object they own than they would be willing to pay to acquire the object they did not own (Kahneman, Knetsch, Thaler, 1990). For this phenomenon, dozens of studies have found the significant disparity between willingness to pay (WTA) and willingness to accept compensation (WTA), and this disparity is believed as an important reason to account for this effect. However, the WTA-WTP disparity cannot adequately interpret the endowment effect because sellers or buyers may be irrational traders. Therefore it is necessary to compare the endowment effect with the rational behavior. For this reason, in the present study we introduced the neutrals whose evaluation was regarded as reference price for reinterpreting endowment effect. In addition, one notable weakness of the previous researches in this domain is that the time period of the ownership is ignored. Although endowment effect can come from an instant valuation, the ownership in real life is dynamic and it may change with the time. Thereby, it is necessary to weigh the endowment effect on a dynamic time of change. Considering that, we inspected the changes of the WTA-WTP disparity in two continuous time periods including "past-present" and "present-future". In this study, we posited that valuation of sellers or buyers was decreased both in the "past-present" and "present-future" time periods, whereas WTA-WTP disparity was unchanged. When the valuation of neutrals as reference price (market price, MP) was introduced, WTA-WTP disparity would be divided into two parts: WTA-MP and MP-WTP. We inferred that MP would decline into a range between WTA and WTP, and the variation tendency of WTA-MP would be different from MP-WTP in a given time period. A total of 674 undergraduates and 35 computer sellers participated in three experiments. In Experiment 1, the participants were randomly assigned to each of 12 scenarios: 3 roles (seller, buyer, and neutral) × 4 time periods from past to present (3 months, 6 months, 12 months, and 24 months). Participants were asked to fill in expected price for a bike after reading a description including its cost price and usage time. In Experiment 2, participants were randomly assigned to each of 8 scenarios: 2 roles (seller and buyer) × 4 time periods from present to future (3 months, 6 months, 12 months, and 24 months). Besides that, 35 computer sellers were specifically assigned to all of 4 time scenarios as the neutrals. They were asked to fill in expected price for a computer after reading a description including its cost price, usage time and configuration. The results revealed that: (1) in all three experiments, selling price was always higher than the buying price, and this gap (WTA-WTP) was even unchanged both in the "past-present" and "present-future" time periods. (2) When valuation of neutrals was introduced as reference price, selling price was closed to reference price in three months, and their gap (WTA-MP) gradually increased following the time prolonging of the ownership. Whereas buying price was closed to reference price in a long time period of two years, and their gap (MP-WTP) gradually decreased following the time prolonging of the ownership. To sum up, the present study showed that endowment effect in trade stably existed even in a long time period. Whereas the introduction of the neutrals, which take the endowment effect into a dynamic time course, could provide a new perspective for the contestable previous viewpoints.

How Do Landowners Price their Lands during Land Expropriation and the Motives Behind It: An Explanation from a WTA/WTP Experiment in Central Beijing

Compensation paid to property owners for land expropriation is always a controversial topic, partly due to the difficulty in revealing households’ true valuation of their housing. This paper estimates and discusses the widely observed ‘willingness to accept–willingness to pay’ (WTA–WTP) gap for surveyed residents of their own houses during land expropriation. By testing several hypotheses interpreting the WTA–WTP disparity from previous studies, the paper tries to establish the incentive for households’ decision-making. The paper employs a contingent valuation method with data from 315 household interviews in central Beijing, China. The paper reports an average WTA/WTP ratio of 3.74 and reaches the conclusion that in our case the high compensation required by property owners largely derives from opportunistic pricing behaviour rather than sentimental attachment to the dwellings that is unobservable in the market price, and that the WTA of the residents is intentionally overpriced.

The Simple Analytics of the WTA-WTP Disparity for Public Goods

A robust finding in economics is that decision-makers often exhibit a much smaller dollar willingness to pay (WTP) for an item than the minimum amount that they claim to be willing to accept (WTA) to part with it. The spread between these two numbers is particularly large for public goods, raising serious public policy concerns regarding which number, if either, is appropriate for valuing such goods. A number of explanations for this phenomenon have been advanced, each perhaps of relevance in particular settings, with little consensus being achieved as to whether any explanation satisfactorily resolves the problem. A traditional utility maximizing model is presented here that predicts that WTA will exceed WTP, quite plausibly by a substantial amount. Moreover, WTA, and not WTP, as the latter is traditionally measured, is seen to be more appropriate for use in public policy decisions about increases in the supply of public goods. The central argument stems from a failure to properly value public goods by traditional methods. Since individuals cannot individually purchase public goods by generating income, they will under-generate any income that would have been devoted to public goods. The marginal WTP observed for such goods will, as a consequence, be understated in economic and survey data relative to true values. Moreover, the striking disparity between WTA and WTP for public goods provides support for the likelihood that economists' systematically undervalue public goods.

Loss aversion without the endowment effect, and other explanations for the WTA–WTP disparity

To learn why WTA regularly exceeds WTP in economic experiments involving inexpensive market goods with ample substitutes, the verbal protocol technique was used in a real cash experiment employing a random price auction. Results suggest that the primary reason for the disparity was subjects’ reluctance to suffer a net loss from any transaction, whether purchase or sale, and tendency to consider sale much below assumed market price as a loss. This interpretation indicates a kind of loss aversion, but not the kind envisioned in the endowment effect, which maintains that selling creates a loss and buying creates a gain.

Effects of study design characteristics on the WTA–WTP disparity: A meta analytical framework

We investigate the effects of certain factors related to study design and elicitation techniques on the WTA–WTP disparity. These factors are: explicit statement of the price, iterative bidding, within/between-subjects nature of the design, and out-of-pocket payments. We adopt a meta analytic approach to generalize from prior studies. This enables us to examine our hypotheses as well as other factors discussed in the literature. Our findings suggest that iterative bidding and within-subjects designs decrease the WTA–WTP disparity, whereas out-of-pocket payments increases the disparity – compared to tax reductions and other indirect payments. The effect of explicitly stating the price of the good to the respondents seems to be insignificant.

Moral dimensions of the WTA–WTP disparity: an experimental examination

Contrary to welfare economic theory, empirical evidence suggests that the amount of money people are willing-to-accept (WTA) to forego a commodity will generally exceed the amount of money they are willing-to-pay (WTP) to gain the commodity. This paper undertakes an experimental examination of the WTA-WTP disparity using conventional and ecologically produced eggs. The results of this experiment reveal that the difference between the mean WTP and WTA for conventional eggs is negligible while the mean WTA is more than 1.5 times higher than the mean WTP in the case of ecological eggs. An explanation for this result is offered following the Boyce et al. (Boyce, R.B., Brown, T.C., McClelland, G.H., Peterson, G.L., Schulze, W.D., 1992. An experimental examination of intrinsic values as a source of the WTA-WTP disparity. Am. Econ. Rev. 82, 1366–1373) notion that an asymmetrical assignment of moral responsibility may cause WTA to exceed WTP. By comparing the two studies, a tentative conclusion is that the valuation disparity is likely to increase with a corresponding increase in the degree of assigned moral responsibility.