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The Effects of Experience on Preference Uncertainty: Theory and Empirics for Public and Quasi-Public Goods

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  • Czajkowski, Mikolaj
  • Hanley, Nicholas
  • LaRiviere, Jacob

Abstract

This paper develops a model of demand estimation in which consumers learn about their true preferences through consumption experiences. We develop a theoretical model of Bayesian updating, perform comparative statics over the model, and show how the theoretical model can be consistently incorporated into a reduced form econometric model. We then estimate the model using data collected for two quasi experience with a good will make consumers more certain over their preferences in both mean and variance are supported in each case.‐public goods. We find that the predictions of the theoretical exercise that additional

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File URL: http://hdl.handle.net/1893/8957
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Bibliographic Info

Paper provided by University of Stirling, Division of Economics in its series Stirling Economics Discussion Papers with number 2012-17.

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Date of creation: Aug 2012
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Handle: RePEc:stl:stledp:2012-17

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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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Keywords: Bayesian; demand estimation; stated preference; generalized multinomial logit; scale; scale variance.;

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Cited by:
  1. Aanesen, Margrethe & Czajkowski, Mikolaj & Falk-Peterson, Jannike & Hanley, Nicholas & LaRiviere, Jacob & Tinch, Dugald, 2014. "Effects of Experience, Knowledge and Signals on Willingness to Pay for a Public Good," Stirling Economics Discussion Papers 2014-04, University of Stirling, Division of Economics.

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