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Differences between Decision and Experienced Utility: An Investigation using the Choice Experiment method

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Author Info

  • Colombo, Sergio
  • Hanley, Nicholas
  • Tinch, Dugald

Abstract

Recent work by Kahneman and others has led to a new focus in economics on a wellbeing-based approach to utility. This suggests that ‘experienced utility' is an alternative and more appropriate basis for the measurement of economic value compared with ‘decision utility'. In this paper, we apply the choice experiment technique to the valuation of changes in upland landscapes in the UK, in order to identify if experience in the moment or in memory impacts on the value associated with changes in ecosystem services under different management regimes. Four treatments are employed to measure decision utility, experienced utility, and remembered utility at two different time intervals. We show that our experienced utility treatment generates very different estimates of preferences than any of the other treatments. Whilst measurement of experienced utility is rife with difficulties, the approach taken allowed the identification of experiential impacts on utility and may have implications for the future use of experienced utility as a basis for the valuation of public goods.

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File URL: http://hdl.handle.net/1893/2706
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Bibliographic Info

Paper provided by University of Stirling, Division of Economics in its series Stirling Economics Discussion Papers with number 2010-13.

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Date of creation: Nov 2010
Date of revision:
Handle: RePEc:stl:stledp:2010-13

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Postal: Division of Economics, University of Stirling, Stirling, Scotland FK9 4LA
Phone: +44 (0)1786 467473
Fax: +44 (0)1786 467469
Web page: http://www.econ.stir.ac.uk/
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Related research

Keywords: national parks; public goods; choice experiments; cost-benefit analysis; experienced utility;

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References

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  1. Nick Hanley & Jason Shogren, 2005. "Is Cost–Benefit Analysis Anomaly-Proof?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 32(1), pages 13-24, 09.
  2. Begoña Álvarez-Farizo & Nick Hanley, 2006. "Improving the Process of Valuing Non-Market Benefits: Combining Citizens’ Juries with Choice Modelling," Land Economics, University of Wisconsin Press, vol. 82(3), pages 465-478.
  3. Riccardo Scarpa & Mara Thiene & Kenneth Train, 2008. "Utility in Willingness to Pay Space: A Tool to Address Confounding Random Scale Effects in Destination Choice to the Alps," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 994-1010.
  4. Bentham, Jeremy, 1781. "An Introduction to the Principles of Morals and Legislation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number bentham1781.
  5. Scarpa, R. & Thiene, M. & Train, K., 2008. "Appendix to Utility in WTP space: a tool to address confounding random scale effects in destination choice to the Alps," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 90(4), November.
  6. Bateman, Ian J, et al, 1997. "A Test of the Theory of Reference-Dependent Preferences," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 479-505, May.
  7. Kahneman, Daniel & Wakker, Peter P & Sarin, Rakesh, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 375-405, May.
  8. George Loewenstein & Ted O'Donoghue & Matthew Rabin, 2001. "Projection Bias in Predicting Future Utility," General Economics and Teaching 0012003, EconWPA.
  9. Loomes, Graham, 2006. "(How) Can we value health, safety and the environment?," Journal of Economic Psychology, Elsevier, vol. 27(6), pages 713-736, December.
  10. MacMillan, Douglas & Hanley, Nick & Lienhoop, Nele, 2006. "Contingent valuation: Environmental polling or preference engine?," Ecological Economics, Elsevier, vol. 60(1), pages 299-307, November.
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Cited by:
  1. Li, Xiaoshu & Boyle, Kevin J. & Pullis, Genevieve, 2012. "Does On-site Experience Affect Responses to Stated Preference Questions?," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124991, Agricultural and Applied Economics Association.

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