Real Options and the WTP/WTA Disparity

Presents a real options model of an agent\u27s decision to purchase or sell a good under conditions of uncertainty, irreversibility, and learning over time. The agent\u27s willingness to pay (WTP) and willingness to accept (WTA) contain both the intrinsic value of the good and an option value associated with delaying the decision until more information is available. The model explicitly demonstrates the effect that timing of an action can have on welfare measurement