Year: 2010
Type: article
Abstract: The willingness-to-pay (WTP) and willingness-to-accept (WTA) disparity reported in a rich empirical literature suggests that people have only an imprecise idea of how valuable a good is to them. In this note, we provide axioms that formally relate this imprecision in the evaluation of a good to the imprecision in the utility function, in the sense that x is strictly preferred to y iff the WTP for x is larger than the WTA for y. The preference relation is therefore an interval order (Fishburn (1970)) with ''interval utility' equal to the WTP/WTA interval itself. Applications to preference for liquidity and the strength of the status quo bias are given.
Source: HAL
Author: Raphaël Giraud
Institution: Centre de recherche sur les stratégies économiques
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2234099619