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Scale-perception bias in the valuation of environmental risks

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  • Jorge E. Araña
  • Carmelo J. León

Abstract

The valuation of environmental risks is commonly approached with the utilization of stated preference methods such as contingent valuation. In these methods, money is utilized as the scale that reflects the individual's underlying utility function. However, this scale can vary across individuals due to different perceptions on what are the right or appropriate bounds for Willingness To Pay (WTP). In this article, we test for scale-perception bias and propose a correction method based on the utilization of anchoring vignettes that define different degrees of preference for the nonmarket good. The proposed method is applied to study the commonly found anomaly ‘probability neglect’, which is defined by the insensitivity to the probability levels in the valuation of environmental risks. The results show that probability neglect disappears when WTP responses are corrected for self-perception bias through the utilization of the anchoring vignettes approach.

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  • Jorge E. Araña & Carmelo J. León, 2012. "Scale-perception bias in the valuation of environmental risks," Applied Economics, Taylor & Francis Journals, vol. 44(20), pages 2607-2617, July.
    • Handle: RePEc:taf:applec:44:y:2012:i:20:p:2607-2617
    DOI: 10.1080/00036846.2011.566188
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    Cited by:

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    2. Armatas, Christopher A. & Venn, Tyron J. & Watson, Alan E., 2014. "Applying Q-methodology to select and define attributes for non-market valuation: A case study from Northwest Wyoming, United States," Ecological Economics, Elsevier, vol. 107(C), pages 447-456.
    3. Carmelo J. León & Jorge E. Araña & Javier de León, 2013. "Valuing the social cost of corruption using subjective well being data and the technique of vignettes," Applied Economics, Taylor & Francis Journals, vol. 45(27), pages 3863-3870, September.
    4. Araña, Jorge E. & León, Carmelo J., 2013. "Dynamic hypothetical bias in discrete choice experiments: Evidence from measuring the impact of corporate social responsibility on consumers demand," Ecological Economics, Elsevier, vol. 87(C), pages 53-61.
    5. Jorge Araña & Carmelo León, 2013. "Can Defaults Save the Climate? Evidence from a Field Experiment on Carbon Offsetting Programs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 54(4), pages 613-626, April.
    6. León, Carmelo J. & de León, Javier & Araña, Jorge E. & González, Matías M., 2015. "Tourists' preferences for congestion, residents' welfare and the ecosystems in a national park," Ecological Economics, Elsevier, vol. 118(C), pages 21-29.
    7. Carlos Fernández-Hernández & Carmelo J. León & Jorge E. Araña & Flora Díaz-Pére, 2016. "Market segmentation, activities and environmental behaviour in rural tourism," Tourism Economics, , vol. 22(5), pages 1033-1054, October.

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