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

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Author Info

  • Mikołaj Czajkowski

    ()
    (University of Warsaw, Faculty of Economic Sciences)

  • Nick Hanley

    ()
    (Economics Division University of Stirling)

  • Jacob LaRiviere

    ()
    (Department of Economics University of Tennessee)

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-public goods. We find that the predictions of the theoretical exercise that additional experience with a good will make consumers more certain over their preferences in both mean and variance are supported in each case.

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File URL: http://www.wne.uw.edu.pl/inf/wyd/WP/WNE_WP81.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by Faculty of Economic Sciences, University of Warsaw in its series Working Papers with number 2012-15.

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Length: 36 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:war:wpaper:2012-15

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Keywords: The support of the Polish Ministry of Science and Higher Education and the Foundation for Polish Science is gratefully acknowledged.;

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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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