NDLI: Reference-dependent valuations of risk: Why willingness-to-accept exceeds willingness-to-pay

Content Provider	Springer Nature Link
Author	Viscusi, W. Kip Huber, Joel
Copyright Year	2011
Abstract	The gap between willingness-to-pay (WTP) and willingness-to-accept (WTA) benefit values typifies situations in which reference points—and direction of movement from reference points—are consequential. Why WTA-WTP discrepancies arise is not well understood. We generalize models of reference dependence to identify separate reference dependence effects for increases and decreases in environmental health risk probabilities, for increases and decreases in costs, and reference dependence effects embodying the interaction of two changes. We estimate separate reference dependence effects for the four possible cost and health risk change combinations using data from our choice-based experiment for a nationally representative sample of 4,745 households. The WTA-WTP gap is due largely to the reference dependence effects related to costs. Standard models of reference dependence are not consistent with the results, as there is an interactive effect. Estimated income effects are under a penny and thus cannot account for higher values of WTA relative to WTP.
Starting Page	19
Ending Page	44
Page Count	26
File Format	PDF
ISSN	08955646
Journal	Journal of Risk and Uncertainty
Volume Number	44
Issue Number	1
e-ISSN	15730476
Language	English
Publisher	Springer US
Publisher Date	2011-12-28
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Reference dependence Health risks Stated preference Willingness to pay WTA WTP Environmental Economics Microeconomics Economic Theory Operations Research/Decision Theory
Content Type	Text
Resource Type	Article
Subject	Finance Accounting Economics and Econometrics

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1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
2	Indian Institute of Technology Kharagpur	Host Institute of the Project: The host institute of the project is responsible for providing infrastructure support and hosting the project	https://www.iitkgp.ac.in
3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
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