It’s all relative: consistent marginal effects with willingness to pay and willingness to accept framing in experimental auctions

ABSTRACT

When eliciting consumer preferences for controversial products – an increasing number of which exist due to increasing demographic diversity and political polarization – conventional assumptions that all individuals derive positive marginal utility from consumption are challenged. It is relatively easy to adjust hypothetical stated preference questionnaires to include negative willingness to pay (WTP), but few studies on controversial products investigate how individuals behave using incentive-compatible revealed preference techniques. Using a framed field experiment with 292 adult subjects, we fill this gap by comparing the differences and similarities between a set of results that arise from the Becker-DeGroot-Marschak (BDM) mechanism between WTP versus willingness to accept (WTA) elicitation methods. This study has two main findings. First, in economic experiments eliciting preferences for controversial products, neither the WTP nor the WTA method fully discovers the true valuation range across all participants. Second, despite framing effects that give rise to different bid distributions, relative revealed preferences for the examined products are consistent under various interventions, indicating that WTP and WTA estimates have consistent policy implications.

KEYWORDS:

• Controversial products
• framing
• product labeling
• willingness to pay
• negative willingness to pay

JEL CLASSIFICATION:

• D12
• C91
• Q18

Acknowledgments

We thank James Geisler, Maddi Valinski, and Julia Parker for their research assistance. We thank the editor and three anonymous referees for their valuable comments that helped advance the paper. All remaining errors are our own. This research was supported in part by the U.S. Department of Agriculture, Economic Research Service. The findings and conclusions in this publication are those of the authors and should not be construed to represent any official USDA or U.S. Government determination or policy.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ For instance, see the meta-analysis of studies of valuations of genetically modified food in which 13 used only WTP, 10 used WTP and WTA, and 4 used only WTA (Lusk et al. 2005).

² Uneven dates due to product availability at the time of experiment.

Additional information

Funding

The work was supported by the S.H. du Pont Endowment [N/A].