WTA-WTP disparity: The role of perceived realism of the valuation setting
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Date
2019
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Abstract
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. Given this
discrepancy, we conclude that to diminish the WTA-WTP disparity resulting from
stated-preference surveys at least to some extent, inquiring about respondents’ perception
on the realism of the valuation setting is an essential element of any survey
design.
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Keywords
willingness-to-pay, stated preferences, willingness-to-accept