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An experimental analysis of impacts of uncertainty and irreversibility on willingness-to-pay

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  • Murat Isik

Abstract

Several empirical studies demonstrated large discrepancies between willingness-to-accept and willingness-to-pay measures. This paper uses an experimental method to determine the extent to which uncertainty about the value of the environmental improvement and the irreversibility of the decision affects the willingness-to-pay to preserve an endangered species. The results show that risk preferences, uncertainty about environmental improvements, and irreversibility significantly influence the willingness-to-pay measure. These results have implications for design and implementation of contingent valuation surveys.

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  • Murat Isik, 2006. "An experimental analysis of impacts of uncertainty and irreversibility on willingness-to-pay," Applied Economics Letters, Taylor & Francis Journals, vol. 13(2), pages 67-72.
    • Handle: RePEc:taf:apeclt:v:13:y:2006:i:2:p:67-72
    DOI: 10.1080/135054850500119203
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    2. Erik Maier & Robert Wilken & Florian Dost, 2015. "The double benefits of consumer certainty: combining risk and range effects," Marketing Letters, Springer, vol. 26(4), pages 473-488, December.
    3. Natter, Martin & Kaufmann, Katharina, 2015. "Voluntary market payments: Underlying motives, success drivers and success potentials," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 57(C), pages 149-157.
    4. Stephen O'Neill & Lava Prakash Yadav, 2016. "Willingness to pay towards a public good: how does a refund option affect stated values?," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 59(2), pages 342-359, February.
    5. Venus, Terese E. & Sauer, Johannes, 2022. "Certainty pays off: The public's value of environmental monitoring," Ecological Economics, Elsevier, vol. 191(C).
    6. Thomas Lundhede & Jette Bredahl Jacobsen & Nick Hanley & Niels Strange & Bo Jellesmark Thorsen, 2015. "Incorporating Outcome Uncertainty and Prior Outcome Beliefs in Stated Preferences," Land Economics, University of Wisconsin Press, vol. 91(2), pages 296-316.

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