Measuring the Willingness to Pay to Avoid Guilt: Estimation Using Equilibrium and Stated Belief Models

31 Pages Posted: 15 Mar 2010

See all articles by Charles Bellemare

Charles Bellemare

Université Laval - Département d'Économique; Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPÉE); IZA Institute of Labor Economics

Alexander Sebald

University of Copenhagen - Department of Economics

Martin Strobel

Maastricht University - Department of Economics; Maastricht University - International Institute of Infonomics

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Abstract

We estimate structural models of guilt aversion to measure the population level of willingness to pay (WTP) to avoid feeling guilt by letting down another player. We compare estimates of WTP under the assumption that higher-order beliefs are in equilibrium (i.e. consistent with the choice distribution) with models estimated using stated beliefs which relax the equilibrium requirement. We estimate WTP in the later case by allowing stated beliefs to be correlated with guilt aversion, thus controlling for a possible source of a consensus effect. All models are estimated using data from an experiment of proposal and response conducted with a large and representative sample of the Dutch population. Our range of estimates suggests that responders are willing to pay between 0.40 and 0.80 Euro to avoid letting down proposers by 1 Euro. Furthermore, we find that WTP estimated using stated beliefs is substantially overestimated (by a factor of two) when correlation between preferences and beliefs is not controlled for. Finally, we find no evidence that WTP is significantly related to the observable socio-economic characteristics of players.

Keywords: guilt aversion, willingness to pay, equilibrium and stated beliefs models

JEL Classification: C93, D63, D84

Suggested Citation

Bellemare, Charles and Sebald, Alexander and Strobel, Martin, Measuring the Willingness to Pay to Avoid Guilt: Estimation Using Equilibrium and Stated Belief Models. IZA Discussion Paper No. 4803, Available at SSRN: https://ssrn.com/abstract=1570401

Charles Bellemare (Contact Author)

Université Laval - Département d'Économique ( email )

2325 Rue de l'Université
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Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPÉE)

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IZA Institute of Labor Economics ( email )

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Germany

Alexander Sebald

University of Copenhagen - Department of Economics ( email )

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1353 Copenhagen K.
Denmark

Martin Strobel

Maastricht University - Department of Economics ( email )

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Maastricht, 6200 MD
Netherlands
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+31 (0)43 38-84878 (Fax)

HOME PAGE: http://Martin.Strobel.infonomics.nl

Maastricht University - International Institute of Infonomics ( email )

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Maastricht, 6200 MD
Netherlands
+31 (0)43 38-83885 (Phone)
+31 (0)43 38-84905 (Fax)

HOME PAGE: http://Martin.Strobel.infonomics.nl

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