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The Endowment Effect and WTA: A Quasi-Experimental Test

Published online by Cambridge University Press:  28 April 2015

H.F. MacDonald  and
J.M. Bowker
H.F. MacDonald
Affiliation:
Department of Agricultural and Applied Economics, University of Georgia
J.M. Bowker
Affiliation:
USDA Forest Service Southeastern Experiment Station, Athens, Georgia 30602
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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 experiment contributes to the research into the 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 valuationendowment effectproperty rightssubstitution effect
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 26 , Issue 2 , December 1994 , pp. 545 - 551
Copyright
Copyright © Southern Agricultural Economics Association 1994

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