Uncertainties and risks in the decision making process are abundant in the area of environmental economics, irrespective of whether the problems being discussed are local or global. This paper uses laboratory evidence from public goods games to examine how in payoff equivalent situations, decision makers contribute towards local or global environmental goods, in the presence of risk and uncertainties in the provision of these goods. We use a within subject design that allows for comparisons across seven different treatments in which subjects are exposed to internal (strategic) and external (environmental) risk and uncertainty. Our results show that the location of the risk and uncertainty matters, with subjects moving away from the external uncertainty in favor of internal uncertainty, when that uncertainty is associated with the local environmental good. When the uncertainty relates to the global environmental good, subjects face both external and internal uncertainty on the same good leading to a significant drop in contributions. We find that in the presence of risk and uncertainty subjects use feedback from other members of their group when deciding about future contributions. The reward for research and development and innovation is captured in the experimental design by the increased probability of obtaining the desired outcome in the endogenous probability treatment. Subjects seem to understand this incentive and contribute more towards global goods in this treatment.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Length: 36 pages Date of creation: 2005 Date of revision: Handle: RePEc:mlb:wpaper:956
Contact details of provider: Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia Phone: +61 3 8344 5289 Fax: +61 3 8344 6899 Email: Web page: http://www.economics.unimelb.edu.au More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Colemann Leong).
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: