Hostname: page-component-cd9895bd7-fscjk Total loading time: 0 Render date: 2024-12-27T19:31:45.776Z Has data issue: false hasContentIssue false
  • English
  • Français

Reference-Dependence Effects in Benefit Assessment: Beyond the WTA–WTP Dichotomy and WTA–WTP Ratios

Published online by Cambridge University Press:  02 April 2015

W. Kip Viscusi
W. Kip Viscusi*
Affiliation:
University Distinguished Professor of Law, Economics, and Management, Vanderbilt University, 131 21st Avenue South, Nashville, TN 37203, USA, e-mail: [email protected], Phone: (615) 343-7715, Fax: (615) 322-5953
Get access Rights & Permissions [Opens in a new window]

Abstract

Willingness-to-pay (WTP) values and willingness-to-accept (WTA) values have received considerable attention, but the role of reference-dependence effects is more diverse. Policies involving cost and risk may have reference point effects with respect to both cost and risk, leading to four potential valuation measures. Experimental evidence for water quality policies suggests that the cost reference effects are particularly influential in that context. There is, however, no evidence of significant reference effects for labor market estimates of the value of a statistical life. Sound application of benefit values other than WTP measures requires pertinent empirical evidence and an assessment of the underlying rationality of the determinants of the reference-dependence effects.

Keywords

H50I18J31Q50benefit–cost analysisreference dependencevalue of statistical lifewillingness to paywillingness to accept
Type
Articles
Information
Journal of Benefit-Cost Analysis , Volume 6 , Issue 1 , Spring 2015 , pp. 187 - 206
Copyright
© Society for Benefit-Cost Analysis 2015 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Cooter, Robert & Ulen, Thomas (1997). In Law and Economics. (2nd ed). Reading, MA: Addison-Wesley.Google Scholar
Horowitz, John K. & McConnell, Kenneth E. (2002). A Review of WTA/WTP Studies. Journal of Environmental Economics and Management, 44(3), 426–447.Google Scholar
Kachelmeier, Steven J. & Shehata, Mohamed (1992). Estimating Risk Preferences under High Monetary Incentives: Experimental Evidence from the People’s Republic of China. American Economic Review, 82, 1120–1140.Google Scholar
Kahneman, Daniel & Tversky, Amos (1979). Prospect Theory: An Analysis of Decisions under Risk. Econometrica, 47(2), 263–291.Google Scholar
Knetsch, Jack L., Riyanto, Yohanes E. & Zong, Jichuan (2012). Gain and Loss Domains and the Choice of Positive and Negative Changes. Journal of Benefit-Cost Analysis, 3(4), 1–18.CrossRefGoogle Scholar
Knetsch, Jack L. & Tang, Fang-Fang (2006). The Context, or Reference, Dependence of Economic Values. In Altman, M. (Ed.), Handbook of Contemporary Behavioral Economics: Foundations and Developments (pp. 423–440). New York: M.E. Sharpe, Inc.Google Scholar
Kniesner, Thomas J., Viscusi, W. Kip & Ziliak, James P. (2014). Willingness to Accept Equals Willingness to Pay for Labor Market Estimates of the Value of a Statistical Life. Journal of Risk and Uncertainty, 48(3), 187–205.CrossRefGoogle Scholar
Plott, Charles R. & Zeiler, Kathryn (2005). The Willingness to Pay-Willingness to Accept Gap, the ‘Endowment Effect,’ Subject Misconceptions, and Experimental Procedures for Eliciting Valuations. American Economic Review, 95(3), 530–545.CrossRefGoogle Scholar
Tuncel, Tuba & Hammitt, James K. (2014). A New Meta-Analysis on the WTP/WTA Disparity. Journal of Environmental Economics and Management, 68, 175–187.CrossRefGoogle Scholar
U.S. Department of Transportation,  Office of the Secretary of Transportation (2013). Memorandum: Guidance on the Treatment of the Economic Value of a Statistical Life in U.S. Department of Transportation Analyses. http://www.dot.gov/office-policy/transportation-policy/guidance-treatment-economic-value-statistical-life.Google Scholar
Viscusi, W. Kip (1989). Prospective Reference Theory: Toward an Exploration of the Paradoxes. Journal of Risk and Uncertainty, 2(3), 235–264.CrossRefGoogle Scholar
Viscusi, W. Kip (2004). The Value of Life: Estimates with Risks by Occupation and Industry. Economic Inquiry, 42(1), 29–48.Google Scholar
Viscusi, W. Kip & Huber, Joel C. (2012). Reference-Dependent Valuations of Risk: Why Willingness-to-Accept Exceeds Willingness-to-Pay. Journal of Risk and Uncertainty, 44, 19–44.CrossRefGoogle Scholar
Viscusi, W. Kip, Magat, Wesley A. & Huber, Joel (1987). An Investigation of the Rationality of Consumer Valuations of Multiple Health Risks. RAND Journal of Economics, 18(4), 465–479.Google Scholar
Zong, Jichuan & Knetsch, Jack L. (2013). Valuations of Changes in Risks: The Reference State and Evidence of Differences between the Measures. The Singapore Economic Review, 58(1), 1350001.Google Scholar