Substitutability, Experience, and the Value Disparity: Evidence from the Marketplace

Abstract

Recent empirical evidence suggests that important disparities exist between willingness to pay and compensation demanded for the same good. These results, which clearly contradict closely held economic doctrines, have led some influential commentators to call for an entirely new economic paradigm to displace conventional neoclassical theory. This study examines the generality of these experimental findings by going to a well-functioning marketplace and examining more than 350 individual decisions across two incentive-compatible elicitation mechanisms. The data suggest that behavior of individuals with intense experience approaches neoclassical predictions: any observed WTA/WTP disparity amongst this group is negligible.WTP/WTA disparity, Field experiment, Marketlike experience