Investigating willingness to pay : willingness to accept asymmetry in choice experiments
We examine discrepancies between WTP and WTA responses within a choice experiment frame. We test linear and non-linear forms for the utility function allowing for both declining marginal utility and loss aversion with respect to each attribute. Findings show that there are significant non-linearities in the utility function even when the range of attribute levels is relatively small. This in turn implies that the WTP-WTA ratio varies according to the particular provision change under consideration. An important source for the WTP-WTA disparity observed is found to be significant loss-aversion in all the attributes including the price, an issue not typically considered in choice experiment applications.