Econ 398 Papers

In addtion to the papers on fear and why we love the beach - we will also discuss this paper

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You can blog about this paper before Thursday's class.

 

 

Comments

[Samantha Smith]

I thought that this was a very interesting experiment and paper. I always knew from my economics classes that WTP was supposed to equal WTA, but was rarely the case. I understood that WTA > WTP, but I chalked it up to human behavior and attachment to certain items. The inclusion of morals and feelings I think it’s a new idea that seems to make sense, especially in the realm of public goods, it makes sense that the WTP and WTA gap closes. So in the WTA frame, they could either keep or donate SEK 100 and SEK 50 and in the WTP frame, they could keep all of the money, or donate SEK 100 and keep 50. It is obviously harder to give up money that you think that you’ll have, but adding in the donation and WWF change the game a bit.
I don’t know if money was the best thing to use with this. While it was good because people don’t have the attachment to individual monies, so it takes away certain peoples’ attachment to certain goods, but also explains the discrepancy between WTP and WTA not as well as objects. I wonder if a coffee mug and money were used or a hat or basically anything else. And I would like to have seen the object be given to the person before the survey and then taken away at the end if they chose to donate rather than keep the object- this way I think we account more for human behavior and slightly irrational (is it irrational?? Just a thought…) attachments to things.

[Austin Pierce]

I certainly enjoyed reading this, as it addresses the consistent question of why does WTA almost almost exceed WTP. However, with any such survey work, there are several factors that need accounted for, which I am uncertain if this research did. First, there is the tempering effect of having the participants rate the various emotions that would be associated with a choice before they actually have to make that choice. This is already starting to privilege the pre-frontal cortex's analytical power over the sheer emotional responses. If they had them choose and then rate how they felt, I think the results would be probably be closer to actual levels. Granted, there is the potential for regret afterwards. Thus, ideally, they would be hooked up to sensors, baseline levels for certain emotional indicators would be processed, and then the sensors could detect variations related to selecting the various choices. That would need more refinement as well.

The other issue of note is social desirability. Although they try to maintain anonymity, the reminder that they will have to give their name and address right before hand will likely skew the actual central tendency in the data. From the instructions provided to participants, there is no account for social desirability effects, e.g. over-claiming estimates or BIDR. That would make me more wary on the ratings given to certain emotions, as we all know "one should feel good about donating to charity," even if we don't, and thus the stated positive emotions associated will likely be higher (and negatives lower) than in actuality.

[Morgan Moskal]

This article shows proof of the difference between an individual’s WTP as opposed to their willingness to accept. These two values should never be equal and that is explained here. I think the study does a good job of finding a relevant cause to donate money towards, which is very easily one of the most important things for doing this study. Although I would think that having a cause that was less relevant to the subjects would provide much more even results. This would show just how involved emotions are in making a decision that involves charity. For example, what would be the difference in change of emotions between this study and a similar one that supported a cause much further from Sweden. I know that isn’t the point of this study, but it would be interesting to see.

I enjoyed reading about the difference in overall WTP and WTA, but I think this survey could have examined the data much further. I would like to see the gender differences in this study as well as age. Are boys or girls more likely to donate at the end of the survey? Do students become more or less generous as they get closer to graduating? There are more things that this survey could have chosen to study, and I would be interested in reading more about this.

[Blair Tynes]

I really enjoyed reading this paper because I think that it sheds incredible light to the gap between WTP and WTA, especially to those economists that have not extensively studied neuroeconomics. Before getting into the details of the experiment, I wanted to comment on the hypothetical trolley car scenario. I think that this scenario and response by the participants represents the clearest situation where emotions completely replace cognitive thinking. In the first scenario when the person who must die is randomized, and there’s no face or action behind the idea of the dying person, there is no choice other than to sacrifice the one person for the greater good of the group. However, when the choice includes the direct action of killing a specific human being, emotion instantly kicks in and changes the decision. Even though these two scenarios result in the exact same result, humans are frightened by the second option. I think that direct responsibility, perceived reaction from others, and guilt could be playing a large part in this experiment.

I also really enjoyed the experiment that the authors constructed. For me, the end results were not incredibly surprising because people value losses more than gains. Intuitively, it makes sense that more people out of the WTA group donated to the WWF because they never actually had the money that they were donated, so they were not giving it up in making the choice. The surprising part of this experiment for me was their described emotions in response to their decision. This ideology digs deeper than the simple explanation of emotions impacting decision-making. Rather we can see exactly which emotions linger after decision-making. The interesting emotions for me are the WTA emotions for those who chose not to donate, especially uneasiness, embarrassment, bothered, guilty, uncomfortable, and dissatisfaction. These negative emotions are exactly what I feel like after not donating to a cause. There are plenty of times that I pass up a charitable donation, and these feelings describe my emotions almost perfectly. Furthermore, in the WTA group the participants are feeling these emotions due to a charitable loss that only they know exists. Essentially they are taking money from a charity by claiming their part of the donation. Their feelings are exacerbated because only they know the outcome. This reasoning could explain increased negative emotions.

[Jennifer Friberg]

What this study gave me, and I am sure a lot of its readers, was an additional way to analyze the discrepancy between WTP and WTA. My first initial response to this inconsistency in the typical economic rational is, “of course people are less willing to give up something they already have!” People become attached to anything from the more obvious, such as pets, cars, and houses, to goods less obvious that memories alone can skew the WTA upward. However, attachment has much less relevance in experiments where the object in question has just been given to the participant or has not even been given to the participant yet. By using this method, this study could remove as best as possible the cause of attachment accounting for the difference between WTP-WTA. The idea that morals have a large part in this divergence, especially in regards to donating to charity, creates a new perspective.

This experiment gave me the urge to see what the results would be with an experiment designed similar to the one in this article but with donations going to a different foundation. Instead of donating to a WWF project, the experiment could be altered to donating to a recipient foundation that has less of a moral obligation. Then the experiment could be run with a common good, such as a microwave. The chosen good should be highly unlikely to initiate a sentimental connection from its owner. As far as donating to an organization, morality and resulting emotions absolutely go into the decision making process. Although both situations are monetarily equal, the questions in this study intentionally frame questions to produce different emotions brought on by thoughts about morality, supporting the authors’ hypothesis. A study trying to explain why WTA>WTP in regards to public and private goods that do not provoke a moral question would be a great control experiment.

[Tommy McThenia]

This paper reinforces how social we are as humans and how perception, framing, and our society really shape our decision making. We've seen these themes across many of our readings, and as always emotion throws a wrench into our typical analytical frameworks. The paper cites an article that finds that the disparity between WTP and WTA was greatest for lottery tickets that evoked the most significant emotional response....
I really liked that the author's were conscious of the framing differences with the WTP and WTA groups. I think framing doesn't get enough credit across disciplines and is a fascinating topic. It really impacts about every decision we make. Every choice is relative to something else: our other alternatives, the situation we find ourself in, the way we view our options. Decisions aren't made it complete vacuums,the lens you see it through often dictates the response. Individuals who understand how to frame choices can really move others to act how they want them too. This appears like it may be manipulative, but is it really? I think that people we deem to be effective communicators all have the ability to frame their arguments and beliefs in a way that shows the merits of their statements...
This brings us around back to the authors' conclusions and conjectures. The authors conclude that emotional experiences and moral perceptions may explain WTP and WTA gap being bigger for public goods vs. private goods. Society has created a sense of collective duty as it relates to public goods. The environment and its resources supposedly belong to all of us, and our constructed society informs us that letting others down should inspire guilt and negative emotions. Public goods are framed in a different manner than private goods, which aren't connected to others beyond ourselves. The moral perception the authors refer to is nothing other than our societal framing of public goods... I found this paper fascinating and appreciated the framing discussion, certainly an underrated decision making driver that should be explored more as neuroecon continues to develop.

[Lucy Ortiz]

I too have found the various readings we have had about WTA versus WTP very interesting. I find it interesting that even though we do not generally think about the gap between the two in everyday life, when it is brought to our attention almost all of us can relate.
This paper brought to mind two main idea. One, is the concept we discussed on Tuesday in both classes, in regards to signing up to be organ donors. Maybe I was missing something pretty clear in this experiment, but did they account for this? It seems that if participants had to go out of their way to respond that they either wanted to change their payment to a donation or change the donation to a payment, laziness may play a part in the outcome? It may be however that it required the same amount of effort to respond with the decision to stay with the original break up of the payment, in which case than this would be moot.
My second thought, was that this paper reminded me of one the findings that stood out the most to me in the text book. Not only do the emotions caused by the experimental situation affect the WTA and WTP, but so do the overall state of the participant. A very sad participant would be more likely to have lower WTA and higher WTP I believe as they would want to change their current state. I wonder what kind of affects these emotional states would have on an experiment like this one, if at all.

[Sommer Ireland]

As with the rest of my peers, I feel like this paper and its experiment did an excellent job at highlighting the discrepancies between WTA and WTP. It echoed similar scenarios that we had discussed in class such as the hidden conservation fee that tourists pay when visiting Belize and how people are much more willing to accept things like that than having to "pay the extra fee" that would go towards conservation if it was listed separately and not included in a plane ticket's cost. I would love to know the results of this particular experiment performed again using the fMRI machine as I think it would really add some insight to the field of Neuroeconomics. While I think the results seem pretty accurate for this experiment, I think that they should have tried to get a larger sample size with proportionately more men, and used older adults instead of college students because personally as a poor college kid, I'd probably be more inclined to keep all the money whereas a young professional might be more generous. Also it would be very interesting to perform this in America as opposed to Sweden since Sweden is a much more environmentally conscious nation, so maybe they are pre-disposed to care more about conservation, thus eliciting stronger feelings of guilt if the student decided to keep the 150 SEK.
Overall, I think the findings of the experiment are pretty spot on. The whole public vs. private goods in regards to WTA and WTP doesn't surprise me at all. In face it just reminds me of the Tragedy of the Commons. Like if a public park was going to shut down due to lack of funds, I would personally say that my willingness to accept not having it would probably be higher than my willingness to pay to keep it. I might really enjoy the park, but my WTP would probably be only $10 to keep it, while at $50 I guess I would be ready to forsake it. There's just something about having to fork over money that's already mine, but I guess I'm just a tightwad when it comes down to the core of the reason.

[Sommer Ireland]

Also, maybe the experimenters should have shown a video on just how cute otters can be. Just saying. http://www.washingtonpost.com/news/speaking-of-science/wp/2014/11/06/aquarium-rescues-orphaned-otter-pup-teaches-it-to-how-to-be-an-otter/?tid=sm_fb

[Bayan Misaghi]

The Biel et al. (2011) paper presents a version of the endowment effect with public goods. Rather than looking at the difference between willingness to pay for a commodity and the willingness to accept for the same commodity, this paper focuses on the “emotional and moral costs” associated with the choice of donating money to a cause (in this case, the WWF). The study shows that for individuals who were expecting to have some of their compensation for participating in the experiment donated to the WWF (the WTA group), there are statistically more participants who are willing to donate compared to the WTP group. Expectation, in my opinion, is what is driving the discrepancy: the WTA group has already done the mental calculus necessary to only allocate 50 SEK to their “endowment” whereas the WTP expected the full 150 SEK. This expectation idea is reminiscent of what we discussed earlier in class: the dopamine expectation and reward pathways.

The question of why the WTA group donated significantly more than the WTP group is a good one and the researchers, I think, do a pretty good job investigating some of the obvious reasons that we might think about. That said, I would have been interested to see the effects on donating given different parameters. The researchers only allow a donation of 100 SEK or nothing. What happens if we allow the individuals to donate in increments of 50 SEK or 10 SEK? Also, I would have been interested to see if the reason some people decided not to donate was because they didn’t like the WWF.

Obviously there are a lot of practical applications for the conclusions associated with this study. In a “charity” scenario, the “fundraiser” should always make the default for the “donator” to give the greatest amount possible. We mentioned this in class with regards to organ donation: when the default is to be an organ donor, significantly more people end up registering as organ donors than when the default is not to be a donor.

[Julia Harbaugh]

As my peers have discussed above, this paper made a lot of sense to me- WTA>WTP. Although according to traditional economics these should be equal (since we’re supposed to be rational decision makers…) it’s a lot more difficult to give up something you already have. Going off Austin’s point, one part of the study I am not a huge fan of was the individuals rating their emotions before and afterward. I put myself in this situation and was unsure of how I would be able to quantify my emotional state before making the decision. Instead, by asking participants after they made the choice they would be more capable in understanding how their emotions shifted as a result of their decision.
I also thought the introduction of the paper was really interesting- bringing in the story about shifting the tracks vs. throwing someone in front of the train to save 5 people. Something I thought about at the height of the Ebola scare was all of these people coming to the US for care. I tried to put myself in the shoes of a Westerner that contracted Ebola. I obviously can’t 100% say what I would do, but at my current healthy state this is what I’m pretty sure I would do… if I contracted Ebola I would want care but I would insist that care takers take me to a country that was exposed to the virus. Before the first patient came to the US there were a handful of developed countries already trying to cure people. I would rather that I was taken to one of those countries instead of exposing the US to the virus. I asked my friends this question- if you got Ebola would you be the FIRST person to bring it to the US and bring a huge social cost to the country? I actually didn’t frame the question like that initially, but further in my argument when they said they would definitely insist they be brought to the US; I brought in that argument for guilt. Everyone still insisted they would want optimal care and didn’t care if they were going to bring a new virus to a country yet exposed. Since I do a lot of traveling it’s definitely possible I could contract some very deadly disease - but I hope and think I would take the greater common good before myself. How do you guys feel about this? Would you want to be taken to a country yet exposed? Also sorry for bringing Ebola back into the conversation… I’m tired of hearing about it too!

[Daniel Molon]

I found Biel and friends’ paper to be very interesting. It is known that the default bias has a large effect in people’s decision making, and people inherently value their possessions more than other people do. What Biel and co. were looking to uncover if the question framing elicits different emotional responses that could influence people’s decision making. They find that when choosing to opt out of donating, it evoked a greater negative emotional response than if not donating was the default choice. This implies that people take default choices as given, and only think about the choice of the other option. Otherwise, people would have the same emotions regarding a choice regardless of whether it is the default or not. This means that it is feasible that people make decisions that are not utility optimizing and instead go with less preferred choices, because the utility optimizing choice is not a strong enough preference that they choose to change from the default. This is in essence a barrier to change choices. This reminds me of the Abilene paradox, in which people will go with the first suggestion rather than come up with an idea of their own.

[Paul Reilly]

Again, this is similar to the organ donor opt in vs opt out. Framing plays a huge role in the choices we make as consumers. In my marketing class, Sears had the problem that they continually had to run discounts on various items to get people in the stores. In an effort to stop discounting, they took off the various% off stickers and just reduced the price accordingly. Sales plummeted and they had to bring back those silly stickers and increase the prices. The real price never changed... however there was a perceived deal. And who doesn't want a good deal. When I get a great "deal" on a videogame I know that it cost the company relatively nothing to produce that extra copy on the margin. Maybe I feel that I pulled a "fast one" on the producer or this emotion of satisfaction with my thrifty decision that makes me value the purchase even more than I paid.

[Paul Reilly]

Piggy backing off of Dan's paper topic, might I appreciate a video game gift less if I know it was on sale just before Christmas and whoever bought it thought they saved money on me?

[Shelby Flores]

I know that people have already touched on the topic of framing, so I will try to avoid discussing that here. But I also think framing is such an interesting topic because it does affect our perception and thus our decision making. Additionally, I know this was stated above, despite all the theory we’ve focused on in our numerous Econ classes at W&L, it still makes sense to us that WTA>WTP, an idea which is yet again proved in this paper. Connecting these two topics together, I think WTA>WTP as a matter of proactiveness v. reactiveness. People are willing to accept more because the “problem” or event has already happened. I’m primarily thinking of it in terms of saving a koala bear through WWF or preventing coral reef degradation as a result of global warming. There’s a chance that maybe some of the koala bears and corals will survive the problem, so we aren’t willing to pay as much to prevent their ruin or extinction. However, once they’re gone, they’re gone—which may have a trickle-down effect elsewhere in the environment—but at that point we have to accept it, though we may have regrets about letting it happen (not being willing to pay more to prevent their ruin/extinction) in the future.

As mentioned above framing certainly comes into play in the trolley car examples in the paper, which I also thought were extremely interesting. The results of the “trolley problems” are different if one frames it as “you are killing less people” rather than “you are killing a person.” Technically, at least one person is being killed in both scenarios which is equally bad, so theoretically there shouldn’t be a difference in a person’s choice to hit the switch or not in both scenarios.