THE DISPARITY BETWEEN ONE'S WILLINGNESS TO ACCEPT AND WILLINGNESS TO PAY

There is controversy in behavioral economics regarding the gap between one’s willingness to pay (WTP) and willingness to accept (WTA). Economic theory states that WTA and WTP should be the same, but they are almost always different when observed. Some economists believe this is due to an individual’s risk attitudes. Some believe experience and age are factors. Others are convinced that there really is no disparity. This paper will outline several experiments for each disparity factor considered and show that there is still no consensus among researchers. I also conducted my own experiment among college students which shows there is a significant gap between WTA and WTP when emotions are taken into consideration. Overall, in order to better understand consumer behavior, researchers should focus less on what causes this gap and more on which factors affect the gap most significantly given the type of good and the market the good is in.