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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: kip.viscusi@vanderbilt.edu, Phone: (615) 343-7715, Fax: (615) 322-5953
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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 

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