Does a Solemn Oath Reduce the WTP-WTA Disparity? Experimental Evidence from China

Qin, Botao and Zhang, Nan (2019): Does a Solemn Oath Reduce the WTP-WTA Disparity? Experimental Evidence from China.

Abstract

Does a solemn oath reduce the willingness-to-pay (WTP) and willingness-toaccept (WTA) disparity? We investigate this question using a laboratory experiment in China with an incentive-compatible Becker-DeGroot-Marschak mechanism, experimental training, and a solemn oath as a commitment device. We find that the WTP-WTA disparity remains robust across all treatments. Taking a solemn oath does not affect WTA but significantly reduces WTP in the possession treatment, thereby widening the gap. Physical possession of the good does not influence WTA. These findings are consistent with reference price theory: sellers anchor to the market price while buyers base bids on intrinsic value, and the oath increases cognitive engagement asymmetrically. Our results provide cross-cultural evidence that a solemn oath increases rather than decreases the WTP-WTA disparity, supporting the view that the gap reflects reference-dependent preferences rather than experimental misconceptions.

• Item Type: MPRA Paper
• Language: English
• Keywords: WTP-WTA disparity; Solemn oath; Becker-DeGroot-Marschak mechanism; Reference-dependent preferences
• Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D46 - Value Theory

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