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

66 Pages Posted: 23 Oct 2017 Last revised: 14 Jun 2021

See all articles by Jonathan Chapman

Jonathan Chapman

New York University (NYU) - New York University Abu Dhabi

Mark Dean

Columbia University

Pietro Ortoleva

Princeton University - Department of Economics

Erik Snowberg

California Institute of Technology - Division of the Humanities and Social Sciences; National Bureau of Economic Research (NBER)

Colin Camerer

California Institute of Technology - Division of the Humanities and Social Sciences

Multiple version iconThere are 2 versions of this paper

Date Written: October 2017

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.

Suggested 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). Available at SSRN: https://ssrn.com/abstract=3057185

Jonathan Chapman (Contact Author)

New York University (NYU) - New York University Abu Dhabi ( email )

PO Box 129188
Abu Dhabi
United Arab Emirates

Mark Dean

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Pietro Ortoleva

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Erik Snowberg

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Colin F. Camerer

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States
626-395-4054 (Phone)
626-432-1726 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
22
Abstract Views
424
PlumX Metrics