Ecological Economics 32 2000 153 – 162
ANALYSIS
Moral dimensions of the WTA – WTP disparity: an experimental examination
Johan Anderson , Dan Vadnjal, Hans-Erik Uhlin
Department of Economics, Swedish Uni6ersity of Agricultural Sciences, PO Box
7013
, S-
750 07
Uppsala, Sweden Received 15 December 1998; received in revised form 23 March 1999; accepted 22 June 1999
Abstract
Contrary to welfare economic theory, empirical evidence suggests that the amount of money people are willing-to-accept WTA to forego a commodity will generally exceed the amount of money they are willing-to-pay
WTP to gain the commodity. This paper undertakes an experimental examination of the WTA-WTP disparity using conventional and ecologically produced eggs. The results of this experiment reveal that the difference between the
mean WTP and WTA for conventional eggs is negligible while the mean WTA is more than 1.5 times higher than the mean WTP in the case of ecological eggs. An explanation for this result is offered following the Boyce et al. Boyce,
R.B., Brown, T.C., McClelland, G.H., Peterson, G.L., Schulze, W.D., 1992. An experimental examination of intrinsic values as a source of the WTA-WTP disparity. Am. Econ. Rev. 82, 1366 – 1373 notion that an asymmetrical
assignment of moral responsibility may cause WTA to exceed WTP. By comparing the two studies, a tentative conclusion is that the valuation disparity is likely to increase with a corresponding increase in the degree of assigned
moral responsibility. © 2000 Elsevier Science B.V. All rights reserved.
Keywords
:
Valuation; Property rights; Moral responsibility; Ecological eggs www.elsevier.comlocateecolecon
1. Introduction
A general and widely accepted assumption in welfare economic theory is that there will be zero
or negligible differences between willingness-to-pay WTP and willingness-to-accept WTA measures
when income effects are small or zero Randall and Stoll, 1980; Freeman, 1993. However, empirical
evidence of contingent valuation studies suggests that the price at which people are willing to sell
environmental goods is significantly higher rang- ing between factors of 2 and 16 than the price at
which they are willing to buy these same goods see Kahneman et al., 1990. This has raised questions
over the likely causes of the valuation disparity between WTP and WTA measures.
Several explanations have been offered, based on experimental
examinations of
the valuation
Corresponding author. 0921-800900 - see front matter © 2000 Elsevier Science B.V. All rights reserved.
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disparity. Kahneman et al. 1991 postulate the endowment effect as a manifestation of an asym-
metry in value which Kahneman and Tversky 1984 refer to as loss aversion. They argue that
losses are being weighted substantially more than gains, and consequently, people will often demand
more compensation to forego a good in their possession than they will be willing to pay to gain
the same good. Following the work of Hanemann 1991, Shogren et al. 1994 offers a further ex-
planation. They argue that the valuation disparity relates to a substitution effect. That is, a disparity
occurs when a good has imperfect substitutes, and the divergence between WTP and WTA expands
as the degree of substitution decreases. A further and much less explored explanation for the valua-
tion disparity is offered by Boyce et al. 1992. They argue that the valuation disparity relates to
intrinsic values.
In an experiment designed to investigate the hypothesis that the introduction of intrinsic values
will create or increase the valuation disparity, Boyce et al. compared four conditions. In the first
set of conditions respondents were asked their WTP to purchase a small Norfolk pine tree which
they could obtain for use as a house plant, or given a tree and asked their WTA to sell the tree
back to the experimenter. To add intrinsic value to preserving the life of the tree, two analogous
conditions were introduced in which the tree would be killed if respondents either failed to
purchase the tree, or sold the tree back to the experimenter. In the experiment, they found that
WTA generally exceeded WTP for both the kill and no-kill conditions, but that the kill condition
exacerbated the disparity between WTP and WTA.
Boyce et al. offer an explanation for the WTP – WTA disparity in the kill scenario by equating
moral responsibility with intrinsic value. They argue that the assignment of property rights shifts
the allocation of moral responsibility for preserv- ing the tree. Thus, intrinsic values are deemed to
be included in WTA measures because the sellers hold the property rights and view themselves as
being responsible for the death of the tree. They are partially excluded from WTP measures, how-
ever, because the buyers do not hold the property rights and they may view the responsibility as
resting at least partially in the hands of the experimenter.
In this paper we present an experiment that tests for the valuation disparity, using convention-
ally produced eggs, and in some treatments, using non-conventional referred to hereafter as ecologi-
cal eggs and informing participants in the experi- ment that these were derived from an animal and
environmentally ‘friendly’ production process. Thus, the experiment is similar to the Boyce et al.
study in that we add a moral dimension to some of the treatments. Our experiment, however, has
been designed to observe whether people place a monetary value, not only on the consumption of
eggs, but also, on the welfare of hens producing ecological eggs and on the environment. Thus, it
is our contention that it is the assignment of moral responsibility associated with an assign-
ment of property rights, giving rise to expressions of intrinsic value, that explains the valuation
disparity.
2. The experiment — a theoretical background
