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Douglas D. Davis and Robert J. Reilly
''On Uncertainty and the WTA-WTP Gap''
( 2012, Vol. 32 No.3 )
We correct an analysis by Isik (2004) regarding the effects of uncertainty on the WTA-WTP gap. Isik presents as his primary result a proposition that the introduction of uncertainty regarding environmental quality improvements causes WTA to increase and WTP to decrease by identical amounts relative to a certainty condition where WTA=WTP. These conclusions are incorrect. In fact, WTP may equal WTA even with uncertainty, and increases in the uncertainty of environmental quality improvements cause both WTA and WTP to fall. Finally, increases in uncertainty may either increase or decrease the WTA –WTP discrepancy.
Keywords: Uncertainty, Compensating Variation, Equivalent Variation
JEL: D8 - Information, Knowledge, and Uncertainty: General
D1 - Household Behavior: General
Manuscript Received : Jul 17 2012 Manuscript Accepted : Sep 18 2012

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