participants attach, not to the consumption of the eggs, but to knowing or believing they are indi-
rectly influencing or supporting ecological-egg production.
Fifthly, while Boyce et al. use an extraordinary comprising the killing of a tree, ours is a normal
good. Finally, following Boyce et al., our suggestion
that the valuation disparity has moral dimensions is intended to supplement rather than replace
Kahneman et al. 1991 notion of an endowment effect. That is, in both the conventional and eco-
logical egg conditions, loss aversion may result in participants demanding more compensation to
forego their eggs compared with the amount of money they are willing to pay to gain the eggs.
But it is the assignment of moral responsibility in the ecological egg conditions that may lead to an
increase in the disparity between WTP and WTA.
Thus, with these comments in mind, it is our contention that the assignment of moral responsi-
bility in the ecological egg E conditions WTA-E and WTP-E will cause a larger disparity between
WTP and WTA as compared with the conven- tional egg C conditions WTA-C and WTP-C.
3. The experiment
3
.
1
. Experimental design A total of 76 students from the Swedish Uni-
versity of Agricultural Sciences and the University College of Ga¨vle agreed to participate in this
experiment. Students came from classes of busi- ness administration, economics and chemistry.
The use of student samples is nowadays a com- mon practice in experimental economics. Evidence
to date suggests that the behaviour of students does not differ markedly from the behaviour of
decision-makers recruited in naturally occurring markets see Smith et al., 1988; Dyer et al., 1989.
In the context of our experiment students are also relevant decision-makers as the majority are self-
catering and egg consumers. However, the atti- tudes of students may differ from those of the
general population. For instance, students may be more environmentally as well as animal welfare
conscious. This may have affected the extent of the valuation disparity in the ecological egg
conditions. In choosing the commodity to be used in this
experiment we decided that the commodity should comprise some element of intrinsic value. We have
already noted the definitional confusion that sur- rounds notions of intrinsic value. In the context of
our experiment, intrinsic value refers to the value participants attach to the welfare of ecological
egg-producing hens as well as the quality of the environment. In order to gauge whether partici-
pants attached intrinsic value to the process of enhancing the welfare of ecological egg-producing
hens, or more general environmental improve- ments, they were asked to respond to follow-up
questions concerning factors motivating their re- sponse. The follow-up questions are described in
the following section. In the experiment, partici- pants in the ecological egg conditions were in-
formed that hens producing these eggs are housed in floor systems with a maximum of seven hens
per square metre indoors during the winter months and outdoors during the summer months
and fed fodder produced using no artificial fer- tilisers or pesticides KRAV, 1997. The ecologi-
cal egg production system is deemed to be superior, from an animal welfare point of view, as
this system allows the animals to perform addi- tional natural behaviour patterns. Moreover, the
fact that the animals can move freely strengthens their skeletons and muscles Jordbruksverket,
1996. Apart from the welfare of the hens, how- ever, participants were also informed that the use
of no artificial fertilisers or pesticides is consistent with the long-term sustainability of the agricul-
tural ecosystem. Participants were also informed about some of the main advantages and disadvan-
tages of ecological egg production.
The experiment was run as an auction and was implemented in four separate conditions, two in
which participants were either buying or selling conventional eggs and two in which participants
were either buying or selling ecological eggs.
Thus, to examine our contention that the as- signment of moral responsibility in the ecological
eggs conditions will cause a larger disparity be- tween WTP and WTA as compared with the
conventional egg conditions, we test two hypothe- ses. These are summarised below.
H : WTA-C = WTP-C
H
1
: WTA-C \ WTP-C H
: WTA-E = WTP-E H
1
: WTA-E \ WTP-E
3
.
2
. Method The chosen auction mechanism used in our
experiment was the multiple-unit Vickrey Vick- rey, 1961 auction MUVA. The Vickrey auction
mechanism has been the preferred auction mecha- nism in a number of real exchange experiments
Shogren et al., 1994; Menkhaus et al., 1992. The MUVA is a theoretically incentive compatible
auction mechanism. In the experiment, three half- dozen cartons of eggs each were auctioned off at
the fourth highest price. A fourth price auction was used instead of a second price auction as it
was deemed necessary to auction off more than one package of eggs to ensure the interests of the
participants was maintained throughout the auc- tion. The incentive compatibility property of the
auction implies that there are no incentives to bid higher or lower than a bidder’s true valuation of
the commodity. If bidders state a higher bid than their true valuation of the commodity, they risk
purchasing the object for a higher price than their true valuation of the commodity. Similarly, if they
state a lower price than their true valuation of the commodity, they run the risk of losing the auction
at a price which is less than their true valuation of the commodity. The incentive compatibility of the
MUVA was explained in the instructions, both theoretically as well as by a numerical example.
Although incentive compatible, the Vickrey auc- tion mechanism may sometimes induce instances
of competitive bidding Cox et al., 1985. How- ever, researchers are divided on the issue of how
serious a problem over bidding is see Kagel et al., 1987 for a view de-emphasising the importance
of overbidding.
The experiments were conducted in classrooms and participants took part in only one session.
Before the instructions were handed out partici- pants were asked to obey the same rules as for an
exam; that is, they were told not to speak to anyone or to pass on any notes, and so forth.
They were also asked to raise their hands if they had any questions.
When the instructions had been handed out participants were instructed to start reading them.
Upon reaching the point in the instructions where the workings and incentive compatibility of the
multiple unit Vickrey auction was explained, the experimental leader read this part out loud. The
auctioned commodity in two of the conditions comprised half-dozen cartons of conventionally
produced eggs, with an approximate retail price of 10 SEK. In the other two conditions, half-dozen
cartons of ecologically produced eggs were used, with an approximate retail price of 15 SEK. The
retail price of the eggs was not disclosed to the students in either the conventional treatment or
the ecological treatment. However, the majority of students in Sweden are self-catered which
means that most of them are familiar with egg purchases and prices. Information about the eco-
logical production process was provided to the participants in the two conditions comprising the
ecological eggs. In the two conditions with con- ventionally produced eggs no information, apart
from the instructions, was provided. Participants in the WTP-C group were given 40 SEK while
participants in the WTA-C were given 30 SEK. Participants in the WTP-E group were given 40
SEK and participants in the WTA-E group were given 25 SEK. The rationale for the difference in
the initial income amounts was to start off partic- ipants in the WTP groups at the same level of
initial utility as those in the WTA groups. This was done in order to control for income and
substitution effects as potential explanations for the WTAWTP disparity see Hanemann, 1991.
It was explained to participants that a participa- tion fee would be given to them after the experi-
ment and that the price, that the winning bidders would pay would be deducted from the fee. In the
WTP groups, the winners of the auction would pay for and collect the eggs after the experiment.
It was explained to participants in the WTA groups that everyone except the winners could
collect their cartons of eggs after the experiment.
Table 1 Experimental results
N S.D.
Mean Conditions
Ratio WTA-C
16.8 18
14.11 14.6
10.39 WTP-C
19 1.15
21.0 11.83
19 WTA-E
18 1.59
WTP-E 13.2
6.48
importantly, however, the disparity between WTP and WTA in the ecological egg conditions is
exacerbated compared with the disparity between the
two measures
in the
conventional egg
conditions. The results of a one-tailed Mann – Whitney U-
test are presented in Table 2.
1
In the ecological egg conditions the difference between the mean
WTP and WTA is significant at the P B 0.05 level. In comparison, however, the difference between
the mean WTP and WTA in the conventional conditions is not statistically significant at the
P B 0.05 level. In other words, at the P B 0.05 level we reject the null hypothesis that WTA-E =
WTP-E and accept the null hypothesis that WTA- C = WTP-C. Thus, these results provide support
for our contention that the assignment of moral responsibility causes a larger disparity between
WTP and WTA as compared with the conven- tional egg conditions.
Moreover, our suggestion in Section 2 that the assignment of moral responsibility gives rise to
expressions of intrinsic value in the ecological egg conditions is supported by the comments made by
participants when asked to rank in order of im- portance the three most important factors that
had motivated their bids or offers. In both the WTP and WTA conditions, participants indicated
a combination of motivational factors. That is, participants stated that their bids or offers were
motivated by the well-being of the hens, animal care aspects or the knowledge that free-range hens
were better off. They were also motivated, albeit less frequently, by more general concerns, such as
the knowledge that fodder produced without pes- ticides would be better for long-term agricultural
sustainability, positive impacts on the environ- ment and ecologically sound production.
2
The auction was run as a one-shot auction, that is, there was only one trial and it was binding. In
an experiment designed to test for the difference between WTP and WTA Shogren et al. 1994
used a repeated bid auction and found conver- gence between the two measures. However, in the
Shogren et al. experiment, bids were posted after each trial, which may have influenced the conver-
gence. As Harrison 1995 points out, repetition of the Vickrey auction may result in a revision of
what subjects perceive the price of field substitutes to be and in so far as this affects the participants
bidding, the repetition of the Vickrey auction will influence the distribution of the observed bids.
Upon completion of the MUVA exercise, but prior to posting the winning bids, participants
were presented with follow-up questions concern- ing factors motivating their response. They were
asked to list, and to rank in order of importance, the three most important factors that had moti-
vated their bids or offers in the auction. These follow-up questions were presented to participants
in all four conditions.
4. Results
