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. These differences have also motivated the use of WTP scenarios, even where property rights imply a WTA framing. We argue that WTA-WTP gaps can be reduced by deploying incentive-compatible surveys and controlling for game form misconceptions, including a failure of respondents to view the survey as consequential. In a study of large-scale wetland conservation, and using a scenario-specific consequentiality measure, we find that the WTA/WTP ratio is between 4.8 and 6.5 for respondents unlikely to have perceived the survey to be consequential. The ratio falls below 2 for respondents likely to hold consequentiality beliefs. Using incentive-compatible mechanisms and controlling for game form misconceptions could be the path to ensuring valid welfare estimates.