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Suppose a Decision Maker (DM) has willingness to pay (WTP) of 100, and her actual elicited willingness to accept (WTA) is 110, can this DM be a standard rational agent? Why or why not?
My thinking is that if the DM is a standard rational agent, then her WTA should also be 100. Is this correct?
Your reasoning is not entirely rigorous, Even for a rational agent there can be a small gap between WTA and WTP due to the wealth effect. However, empirically this effect accounts for a very small fraction of the WTA/WTP gap, which is why other explanations are generally preferred.
