Journal or Book Title
American Economic Review
First Page or Article ID Number
This paper tests the conjecture that the divergence of willingness to pay (WTP) and willingness to accept (WTA) for identical goods is driven by the degree of substitution between goods. In contrast to well-known results for market goods with close substitutes (i.e., candy bars and coffee mugs), our results indicate a convergence of WTP and WTA measures of value. However, for a nonmarket good with imperfect substitutes (i.e., reduced health risk), the divergence of WTP and WTA value measures is persistent, even with repeated market participation and full information on the nature of the good.
American Economic Association
Shogren, Jason F.; Shin, Seung Y.; Hayes, Dermot J.; and Kliebenstein, James B., "Resolving Differences in Willingness to Pay and Willingness to Accept" (1994). Economics Publications. 10.