RESOLVING DIFFERENCES IN WILLINGNESS-TO-PAY AND WILLINGNESS TO ACCEPT

This paper tests the conjecture that the divergence of willingness to pay (WTP) and willingness to accept (WTA) for identical goods is drive n by the degree of substitution between goods. In contrast to well-kno wn results for market goods with close substitutes (i.e., candy bars a nd coffee mugs), our results indicate a convergence of WTP and WTA mea sures of value. However, for a nonmarket good with imperfect substitut es (i.e., reduced health risk), the divergence of WTP and WTA value me asures is persistent, even with repeated market participation and full information on the nature of the good.