A mechanism to derive more truthful willingness to accept values for renewable energy systems

• Main Authors: Mehrshad Radmehr, Ken Willis, Hugh Metcalf
• Format: Article
• Language: English
• Published: Elsevier 2018-01-01
• Series: Heliyon
• Subjects: Energy; Economics; Psychology
• Online Access: http://www.sciencedirect.com/science/article/pii/S2405844017311738

This paper examines and compares households’ willingness to accept (WTA)/willingness to pay (WTP) ratio for solar power equipment on their premises through both a novel experimental approach and conventional techniques. The experimental approach was administered by using a Becker-DeGroot-Marschak method and cheap talk, with open-ended questions of WTA/WTP. The results were quite striking. The ratio for the incentivised approach was 1.08:1; whereas for the conventional approach it was 3.5:1. The findings suggest that the hypothesis that WTP equals WTA cannot be rejected for the incentivised mechanism, and it appears to control for the individual’s strategic behaviour bias as a treatment against over-estimating WTA and under-estimating WTP. The findings also provide some policy implications for Northern Cyprus: the government can set lower financial incentives to increase the solar power installed capacity on the island.