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Estimating non-market values under scenario and policy ambiguity: the case of climate change mitigation in Australia

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Author Info
Sonia Akter () (Crawford School of Economics and Government, the Australian National University, Australia)
Jeff Bennett () (Crawford School of Economics and Government, the Australian National University, Australia)

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Abstract

This paper proposes an extension to existing models of non-expected utility (NEU) in the stated preference (SP) literature. The extension incorporates the impact of multiple sources of ambiguity in individual decision making behavior. Empirical testing of the proposed decision model was carried out in Australia using a dichotomous choice contingent valuation study of a national ‘Carbon Pollution Reduction Scheme (CPRS)’. The results of the study demonstrate that subjective expectations of the context scenario and subjective policy expectations are important determinants of individual decision making in a SP framework. Furthermore, the results of the study demonstrate that decision weight functions are non-linear (quadratic) in subjective scenario expectations and subjective policy expectation. Although evidence was found to link willingness to pay to scenario ambiguity, policy ambiguity was found to have no statistically significant influence on individual decision making

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Paper provided by Environmental Economics Research Hub, Crawford School, Australian National University in its series Environmental Economics Research Hub Research Reports with number 0932.

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Date of creation: Jun 2009
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Handle: RePEc:een:eenhrr:0932

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Postal: JG Crawford Building #13, Australian National University ACT 0200
Web page: http://www.crawford.anu.edu.au/research_units/eerh/
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Find related papers by JEL classification:
C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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  10. Kunreuther, Howard & Meszaros, Jacqueline & Hogarth, Robin M. & Spranca, Mark, 1995. "Ambiguity and underwriter decision processes," Journal of Economic Behavior & Organization, Elsevier, vol. 26(3), pages 337-352, May. [Downloadable!] (restricted)
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