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Endowment Effects and Drinking Water Quality

  • Pamela L. Booth, Todd Guilfoos and Emi Uchida
Abstract

We conduct a laboratory experiment to test for the existence of the endowment effect—a gap between willingness to accept and willingness to pay—for improved drinking water quality using a within-subject design. We find a statistically significant and positive gap. Willingness to accept is 62 to 125 cents higher than willingness to pay on average, indicating the presence of endowment effects. This gap is robust to information about the quality of water being consumed. We also identify some heterogeneity in the size of the gaps that is associated with differences in subjects' knowledge of drinking water quality and disparities in their incomes.

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Copyright
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.
Corresponding author
Correspondence: Todd Guilfoos ■ Department of Environmental and Natural Resource EconomicsKingston Coastal Institute1 Greenhouse RoadUniversity of Rhode IslandKingston, RI 02881 ■ Phone 1.401.874.2471 ■ Email guilfoos@uri.edu.
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Agricultural and Resource Economics Review
  • ISSN: 1068-2805
  • EISSN: 2372-2614
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