RT Journal Article
SR Electronic
T1 Incorporating Outcome Uncertainty and Prior Outcome Beliefs in Stated Preferences
JF Land Economics
JO Land Econ
FD University of Wisconsin Press
SP 296
OP 316
DO 10.3368/le.91.2.296
VO 91
IS 2
A1 Lundhede, Thomas
A1 Jacobsen, Jette Bredahl
A1 Hanley, Nick
A1 Strange, Niels
A1 Thorsen, Bo Jellesmark
YR 2015
UL http://le.uwpress.org/content/91/2/296.abstract
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. (JEL C53, D62)