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Willingness to Pay and Willingness to Accept are Probably Less Correlated than You Think

Chapman, Jonathan and Dean, Mark and Ortoleva, Pietro and Snowberg, Erik and Camerer, Colin (2017) Willingness to Pay and Willingness to Accept are Probably Less Correlated than You Think. . (Unpublished) https://resolver.caltech.edu/CaltechAUTHORS:20200327-133526209

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Abstract

An enormous literature documents that willingness to pay (WTP) is less than willingness to accept (WTA) a monetary amount for an object, a phenomenon called the endowment effect. Using data from an incentivized survey of a representative sample of 3,000 U.S. adults, we add one (probably) surprising additional finding: WTA and WTP for a lottery are, at best, slightly correlated. Across all respondents, the correlation is slightly negative. A meta-study of published experiments with university students shows a correlation of around 0.15--0.2, consistent with the correlation in our data for high-IQ respondents. While poorly related to each other, WTA and WTP are closely related to different measures of risk aversion, and relatively stable across time. We show that the endowment effect is not related to individual-level measures of loss aversion, counter to Prospect Theory or Stochastic Reference Dependence.


Item Type:Report or Paper (Working Paper)
Related URLs:
URLURL TypeDescription
https://ssrn.com/abstract=3057185SSRNDiscussion Paper
ORCID:
AuthorORCID
Camerer, Colin0000-0003-4049-1871
Additional Information:Date Written: October 2017. Posted: 23 Oct 2017. CESifo Working Paper Series No. 6492; NBER Working Paper No. w23954. We thank Douglas Bernheim, Benedetto De Martino, Stefano Della Vigna, Eric Johnson, Graham Loomes, Jan Rivkin, Peter Wakker, Micheal Woodford, and the participants of seminars and conferences for their useful comments and suggestions. Evan Friedman and Khanh Ngoc Han Huynh provided research assistance. Camerer, Ortoleva, and Snowberg gratefully acknowledge the financial support of NSF Grant SMA-1329195. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Funders:
Funding AgencyGrant Number
NSFSMA-1329195
Subject Keywords:Willingness to Pay, Willingness to Accept, Endowment Effect, Loss Aversion, Risk Aversion
Other Numbering System:
Other Numbering System NameOther Numbering System ID
CESifo Working Paper6492
NBER Working Paperw23954
Record Number:CaltechAUTHORS:20200327-133526209
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20200327-133526209
Official Citation:Chapman, Jonathan and Dean, Mark and Ortoleva, Pietro and Snowberg, Erik and Camerer, Colin F., Willingness to Pay and Willingness to Accept are Probably Less Correlated than You Think (October 2017). NBER Working Paper No. w23954. Available at SSRN: https://ssrn.com/abstract=3057185
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:102152
Collection:CaltechAUTHORS
Deposited By: Tony Diaz
Deposited On:27 Mar 2020 20:45
Last Modified:27 Mar 2020 20:45

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