Working Paper: NBER ID: w23954
Authors: Jonathan Chapman; Mark Dean; Pietro Ortoleva; Erik Snowberg; Colin Camerer
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.
Keywords: Willingness to Pay; Willingness to Accept; Endowment Effect; Risk Aversion
JEL Codes: C80; D81; D91
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| WTA (F13) | WTP (F13) |
| WTA (F13) | risk aversion (D81) |
| WTP (F13) | risk aversion (D81) |
| risk aversion (D81) | endowment effect (D11) |
| loss aversion (G41) | endowment effect (D11) |