Revisiting the gap between the willingness to pay and willingness to accept for public goods

Abstract

Large differences between willingness to pay (WTP) and willingness to accept (WTA) compensation measures have raised concerns over the validity of stated preference methods for valuing public goods. Extending the insights of Plott and Zeiler (2005), we argue that WTAWTP gaps can be reduced by deploying incentive compatible survey instruments. In a study of the value of large-scale wetland conservation in Quebec (Canada), we find that WTA decreases, WTP increases, and the WTA/WTP ratio decreases with the degree of respondents’ perceived consequentiality of their answers. The consequentiality of a valuation survey is one condition necessary to ensure its incentive compatibility. Our results show that for respondents who view the survey as inconsequential, the WTA/WTP ratio is between 4.8 and 6.5. For respondents who hold at least ‘moderate’ beliefs of consequentiality, the WTA/WTP ratio is below 2. Better controlling for consequentiality and other beliefs could be the path to ensuring valid WTA estimates.

About the presenter's meeting

Daniel Rondeau is available for zoom meetings before the seminar. If you would like to meet with Daniel, please contact Dr Andrea La Nauze a.lanauze@uq.edu.au.