The endowment effect and WTA: a quasi-experimental test

H.F. MacDonald; J. Michael Bowker

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The endowment effect and WTA: a quasi-experimental test

Informally Refereed

Authors:

H.F. MacDonald, J. Michael Bowker

Year:

1993

Type:

Scientific Journal

Station:

Southern Research Station

Source:

J. Agr. and Applied Econ., Vol. 26(2): 545-551

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Abstract

This paper reports a test of the endowment effect in an economic analysis of localized air pollution. Regression techniques are used to test the significance of perceived property rights on household WTP for improved air quality versus WTA compensation to forgo an improvement in air quality. Our experimental contributes to the research into WTP/WTA divergence by providing a new basis for supporting the existence of an endowment effect. Our results are in contrast to recent work by shogren et al. which supports the substitution proposition of Hanemann while rejecting the endowment effect.

Keywords

contingent valuation, endowment effect, property rights, substitution effect

Citation

MacDonald, H.F.; Bowker, J. Michael. 1993. The endowment effect and WTA: a quasi-experimental test. J. Agr. and Applied Econ., Vol. 26(2): 545-551