Journal Article

Pricing risk and ambiguity: The effect of perspective taking

Quarterly Journal of Experimental Psychology

There is a large literature showing that willingness-to-accept (WTA) is usually much higher than willingness-to-pay (WTP) in empirical studies although they should be roughly equal according to traditional economic theory. A second stream of literature shows that people are typically ambiguity averse, i.e. they prefer lotteries with known probabilities over lotteries with unknown ones. Our study combines both streams of literature and analyzes whether there is an interaction between the WTP-WTA disparity and ambiguity aversion.

Authors

Stefan T. Trautmann

Info

Publication Date
JEL Classification
C91, D81