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Wildfires in Poland: The impact of risk preferences and loss aversion on environmental choices

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  • Bartczak, Anna
  • Chilton, Susan
  • Meyerhoff, Jürgen

Abstract

This paper examines how risk preferences and loss aversion affect individual choices regarding environmental risks, specifically forest wildfires in Poland. We also examine how the same individuals make choices in the context of financial risks. Estimating risk, loss aversion and weighting probability parameters allows us to directly test whether Prospect Theory or Expected Utility Theory is the better underlying behavioural model in both domains. We find that in a sample consisting of a general population of Poles, the majority of respondents demonstrate behaviour consistent with Prospect Theory in both environmental and financial domains. This finding has significant implications for future non-market valuation studies. Additionally, in this study, we find evidence for similar risk preferences across those two domains.

Suggested Citation

  • Bartczak, Anna & Chilton, Susan & Meyerhoff, Jürgen, 2015. "Wildfires in Poland: The impact of risk preferences and loss aversion on environmental choices," Ecological Economics, Elsevier, vol. 116(C), pages 300-309.
    • Handle: RePEc:eee:ecolec:v:116:y:2015:i:c:p:300-309
    DOI: 10.1016/j.ecolecon.2015.05.006
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    2. Zack Dorner & Daniel A. Brent & Anke Leroux, 2019. "Preferences for Intrinsically Risky Attributes," Land Economics, University of Wisconsin Press, vol. 95(4), pages 494-514.
    3. Alló, M. & Loureiro, M.L., 2020. "Assessing preferences for wildfire prevention policies in Spain," Forest Policy and Economics, Elsevier, vol. 115(C).
    4. Dorner, Zach & Brent, Daniel A. & Leroux, Anke, 2016. "Eliciting Risk Preferences for Intrinsic Attributes," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236644, Agricultural and Applied Economics Association.
    5. Rui He & Jianjun Jin & Foyuan Kuang & Chenyang Zhang & Tong Guan, 2019. "Farmers’ Risk Cognition, Risk Preferences and Climate Change Adaptive Behavior: A Structural Equation Modeling Approach," IJERPH, MDPI, vol. 17(1), pages 1-13, December.
    6. Töppel, Jannick & Tränkler, Timm, 2019. "Modeling energy efficiency insurances and energy performance contracts for a quantitative comparison of risk mitigation potential," Energy Economics, Elsevier, vol. 80(C), pages 842-859.
    7. Champ, Patricia A. & Meldrum, James R. & Brenkert-Smith, Hannah & Warziniack, Travis W. & Barth, Christopher M. & Falk, Lilia C. & Gomez, Jamie B., 2020. "Do actions speak louder than words? Comparing the effect of risk aversion on objective and self-reported mitigation measures," Journal of Economic Behavior & Organization, Elsevier, vol. 169(C), pages 301-313.
    8. James R. Meldrum & Hannah Brenkert-Smith & Patricia A. Champ & Jamie Gomez & Hilary Byerly & Lilia Falk & Christopher M. Barth, 2021. "Would you like to know more? The effect of personalized wildfire risk information and social comparisons on information-seeking behavior in the wildland–urban interface," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 106(3), pages 2139-2161, April.
    9. Daniel Osberghaus, 2017. "Prospect theory, mitigation and adaptation to climate change," Journal of Risk Research, Taylor & Francis Journals, vol. 20(7), pages 909-930, July.
    10. Thomas Meissner & Xavier Gassmann & Corinne Faure & Joachim Schleich, 2023. "Individual characteristics associated with risk and time preferences: A multi country representative survey," Journal of Risk and Uncertainty, Springer, vol. 66(1), pages 77-107, February.
    11. Schlüter, Maja & Baeza, Andres & Dressler, Gunnar & Frank, Karin & Groeneveld, Jürgen & Jager, Wander & Janssen, Marco A. & McAllister, Ryan R.J. & Müller, Birgit & Orach, Kirill & Schwarz, Nina & Wij, 2017. "A framework for mapping and comparing behavioural theories in models of social-ecological systems," Ecological Economics, Elsevier, vol. 131(C), pages 21-35.

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    More about this item

    Keywords

    Risk preferences over financial and environmental domains; Forest fires; Loss aversion; Probability weighting; Prospect Theory;
    All these keywords.

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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