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Incorporating Outcome Uncertainty and Prior Outcome Beliefs in Stated Preferences

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  • Thomas Lundhede
  • Jette Bredahl Jacobsen
  • Nick Hanley
  • Niels Strange
  • Bo Jellesmark Thorsen

Abstract

Stated preference studies tell respondents that policies create environmental changes with varying levels of uncertainty. However, respondents may include their own a priori assessments of uncertainty when making choices among policy options. Using a choice experiment eliciting respondents’ preferences for conservation policies under climate change, we find that higher outcome uncertainty reduces utility. When accounting for endogeneity, we find that prior beliefs play a significant role in this cost of uncertainty. Thus, merely stating “objective†levels of outcome uncertainty will not necessarily solve the problem of people valuing something differently from originally intended: respondents’ prior beliefs must be accounted for.

Suggested Citation

  • 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.
  • Handle: RePEc:uwp:landec:v:91:y:2015:i:2:p:296-316
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    Cited by:

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    2. Michela Faccioli & Laure Kuhfuss & Mikołaj Czajkowski, 2019. "Stated Preferences for Conservation Policies Under Uncertainty: Insights on the Effect of Individuals’ Risk Attitudes in the Environmental Domain," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(2), pages 627-659, June.
    3. Robert J. Johnston & Kevin J. Boyle & Wiktor (Vic) Adamowicz & Jeff Bennett & Roy Brouwer & Trudy Ann Cameron & W. Michael Hanemann & Nick Hanley & Mandy Ryan & Riccardo Scarpa & Roger Tourangeau & Ch, 2017. "Contemporary Guidance for Stated Preference Studies," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 4(2), pages 319-405.
    4. Andreas Ziegler, 2017. "Economic calculus or personal and social values? A micro-econometric analysis of the acceptance of climate and energy policy measures," MAGKS Papers on Economics 201716, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    5. Tobias Holmsgaard Larsen & Thomas Lundhede & Søren Bøye Olsen, 2020. "Assessing the value of surface water and groundwater quality improvements when time lags and outcome uncertainty exist: Results from a choice experiment survey across four different countries," IFRO Working Paper 2020/12, University of Copenhagen, Department of Food and Resource Economics.
    6. Rheinberger, Christoph & Schläpfer, Felix, 2015. "It’s the Cost Credibility, Stupid! A Comment on “Consequentiality: A Theoretical and Experimental Exploration of a Single Binary Choice”," TSE Working Papers 15-573, Toulouse School of Economics (TSE).
    7. 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.
    8. Torres, Cati & Faccioli, Michela & Riera Font, Antoni, 2017. "Waiting or acting now? The effect on willingness-to-pay of delivering inherent uncertainty information in choice experiments," Ecological Economics, Elsevier, vol. 131(C), pages 231-240.
    9. Raja Chakir & Maia David & Estelle Gozlan & Aminata Sangare, 2016. "Valuing the Impacts of An Invasive Biological Control Agent: A Choice Experiment on the Asian Ladybird in France," Journal of Agricultural Economics, Wiley Blackwell, vol. 67(3), pages 619-638, September.
    10. Varela, Elsa & Jacobsen, Jette Bredahl & Soliño, Mario, 2014. "Understanding the heterogeneity of social preferences for fire prevention management," Ecological Economics, Elsevier, vol. 106(C), pages 91-104.
    11. Bujosa, Angel & Torres, Cati & Riera, Antoni, 2018. "Framing Decisions in Uncertain Scenarios: An Analysis of Tourist Preferences in the Face of Global Warming," Ecological Economics, Elsevier, vol. 148(C), pages 36-42.
    12. Bartkowski, Bartosz, 2017. "Are diverse ecosystems more valuable? Economic value of biodiversity as result of uncertainty and spatial interactions in ecosystem service provision," Ecosystem Services, Elsevier, vol. 24(C), pages 50-57.

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    More about this item

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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