Paired comparison estimates of willingness to accept versus contingent valuation estimates of willingness to pay

Abstract

Estimating empirical measures of an individual's willingness to accept that are consistent with conventional economic theory, has proven difficult. The method of paired comparison offers a promising approach to estimate willingness to accept. This method involves having individuals make binary choices between receiving a particular good or a sum of money. Willingness to accept can be inferred from the ranking of dollar amounts and the good of interest. Using the paired comparison approach, mean (median) willingness to accept for a private good is estimated at $59($52). Contingent valuation estimate of willingness to pay for the same good yields a mean (median) of $28($28). While these estimates are statistically different, the ratio of willingness to accept to willingness to pay is less than in most previous studies and closer to ratios found in actual cash experiments.

Citation

Loomis, John B.; Peterson, George; Champ, Patricia A.; Brown, Thomas C.; Lucero, Beatrice. 1998. Paired comparison estimates of willingness to accept versus contingent valuation estimates of willingness to pay. Journal of economic behavior & organization. 35(4): 501-515