The Willingness-To-Pay and Willingness-To-Accept are Probably Less Correlated than You Think

An enormous literature documents that willingness to pay (WTP) is less than willingness to accept (WTA) a monetary amount for an object, a phenomenon called the endowment effect. Using data from an incentivized survey of a representative sample of 3,000 U.S. adults, we add one (probably) surprising additional finding: WTA and WTP for a lottery are, at best, slightly correlated. Across all participants, the correlation is slightly negative. We also collect data from published, incentivized, studies, all run on university students, to analyze the correlation between WTA and WTP, which those studies did not examine. We document a correlation of 0.15-0.2, which is consistent with the correlation for high-IQ participants in our own data. While poorly related to each other, WTA and WTP are closely related to different measures of risk aversion, and relatively stable across time. Models of reference dependence can explain the correlations we observe in our data, but only with specific parameterizations. However, these models are inconsistent with other aspects of our data, suggesting the need for more theories and empirical studies of the processes of buying and selling.