Incorporating outcome uncertainty and prior outcome beliefs in stated preferences

TY - JOUR

T1 - Incorporating outcome uncertainty and prior outcome beliefs in stated preferences

AU - Lundhede, Thomas

AU - Jacobsen, Jette Bredahl

AU - Hanley, Nick

AU - Strange, Niels

AU - Thorsen, Bo Jellesmark

PY - 2015

Y1 - 2015

N2 - Stated preference studies tell respondents that policies create environmental changes with varying levels of uncertainty. However, respondents may include their own a priori assessments of uncertainty when making choices among policy options. Using a choice experiment eliciting respondents’ preferences for conservation policies under climate change, we find that higher outcome uncertainty reduces utility. When accounting for endogeneity, we find that prior beliefs play a significant role in this cost of uncertainty. Thus, merely stating “objective” levels of outcome uncertainty will not necessarily solve the problem of people valuing something differently from originally intended: respondents’ prior beliefs must be accounted for.

AB - Stated preference studies tell respondents that policies create environmental changes with varying levels of uncertainty. However, respondents may include their own a priori assessments of uncertainty when making choices among policy options. Using a choice experiment eliciting respondents’ preferences for conservation policies under climate change, we find that higher outcome uncertainty reduces utility. When accounting for endogeneity, we find that prior beliefs play a significant role in this cost of uncertainty. Thus, merely stating “objective” levels of outcome uncertainty will not necessarily solve the problem of people valuing something differently from originally intended: respondents’ prior beliefs must be accounted for.

U2 - 10.3368/le.91.2.296

DO - 10.3368/le.91.2.296

M3 - Journal article

SN - 0023-7639

VL - 91

SP - 296

EP - 316

JO - Land Economics

JF - Land Economics

IS - 2

ER -