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Measuring the willingness to pay to avoid guilt: estimation using equilibrium and stated belief models
Author(s) -
Bellemare Charles,
Sebald Alexander,
Strobel Martin
Publication year - 2010
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.1227
Subject(s) - willingness to pay , economics , econometrics , estimation , feeling , order (exchange) , range (aeronautics) , population , sample (material) , structural estimation , microeconomics , psychology , social psychology , chemistry , materials science , demography , management , finance , chromatography , sociology , composite material
We estimate structural models of guilt aversion to measure the population level of willingness to pay (WTP) to avoid feeling guilt by letting down another player. We compare estimates of WTP under the assumption that higher‐order beliefs are in equilibrium (i.e., consistent with the choice distribution) with models estimated using stated beliefs which relax the equilibrium requirement. We estimate WTP in the latter case by allowing stated beliefs to be correlated with guilt aversion, thus controlling for a possible source of a consensus effect. All models are estimated using data from an experiment of proposal and response conducted with a large and representative sample of the Dutch population. Our range of estimates suggests that responders are willing to pay between €0.40 and €0.80 to avoid letting down proposers by €1. Furthermore, we find that WTP estimated using stated beliefs is substantially overestimated (by a factor of two) when correlation between preferences and beliefs is not controlled for. Finally, we find no evidence that WTP is significantly related to the observable socio‐economic characteristics of players. Copyright © 2010 John Wiley & Sons, Ltd.