Loss of Substitutability: A Note On Disparity between WTP and WTA

This paper focuses on the disparity between willingness-to-pay and willingness-to-accept indices in nonmarket valuation. The substitution effect makes agents value net losses higher than opportunity losses. In regard to net losses, we show that imperfect substitutability respectively induces infinite and finite compensation demanded in the neoclassical framework and loss aversion. Consequently, the models translate net losses in a different way
[ - ]
[ + ]