IDEAS home Printed from https://ideas.repec.org/a/uwp/landec/v95y2019i4p494-514.html
   My bibliography  Save this article

Preferences for Intrinsically Risky Attributes

Author

Listed:
  • Zack Dorner
  • Daniel A. Brent
  • Anke Leroux

Abstract

Incentivized experiments and stated preference methods are commonly viewed as substitutes in preference elicitation. We leverage the distinct strengths of each approach by combining a fully incentivized risk experiment with a stated preference survey to model utility for intrinsically risky attributes. A door-to-door survey of 981 participants in a drought-prone region elicits preferences for alternative sources of municipal water, conditional on water price and quality. Participants’ observed and imputed risk attitudes are incorporated into preference estimation. Our results are consistent with the hypothesis that participants are concerned about water supply risk, but not about new technology risk.

Suggested Citation

  • 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.
    • Handle: RePEc:uwp:landec:v:95:y:2019:i:4:p:494-514
    Note: DOI: 10.3368/le.95.4.494
    as

    Download full text from publisher

    File URL: http://le.uwpress.org/cgi/reprint/95/4/494
    Download Restriction: A subscripton is required to access pdf files. Pay per article is available.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. John Rolfe & Jill Windle, 2015. "Do Respondents Adjust Their Expected Utility in the Presence of an Outcome Certainty Attribute in a Choice Experiment?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(1), pages 125-142, January.
    2. Andersson, Henrik & Hole, Arne Risa & Svensson, Mikael, 2016. "Valuation of small and multiple health risks: A critical analysis of SP data applied to food and water safety," Journal of Environmental Economics and Management, Elsevier, vol. 75(C), pages 41-53.
    3. 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.
    4. Brent, Daniel A. & Ward, Michael B., 2018. "Energy efficiency and financial literacy," Journal of Environmental Economics and Management, Elsevier, vol. 90(C), pages 181-216.
    5. Duke, Joshua M. & Dundas, Steven J. & Johnston, Robert J. & Messer, Kent D., 2014. "Prioritizing payment for environmental services: Using nonmarket benefits and costs for optimal selection," Ecological Economics, Elsevier, vol. 105(C), pages 319-329.
    6. Robert J. Johnston & Stephen K. Swallow & Timothy J. Tyrrell & Dana Marie Bauer, 2003. "Rural Amenity Values and Length of Residency," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(4), pages 1000-1015.
    7. Qiu, Yueming & Colson, Gregory & Grebitus, Carola, 2014. "Risk preferences and purchase of energy-efficient technologies in the residential sector," Ecological Economics, Elsevier, vol. 107(C), pages 216-229.
    8. Richard G. Newell & Juha Siikamäki, 2015. "Individual Time Preferences and Energy Efficiency," American Economic Review, American Economic Association, vol. 105(5), pages 196-200, May.
    9. Thong Meas & Wuyang Hu & Marvin T. Batte & Timothy A. Woods & Stan Ernst, 2015. "Substitutes or Complements? Consumer Preference for Local and Organic Food Attributes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(4), pages 1044-1071.
    10. Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2007. "Estimating Risk Attitudes in Denmark: A Field Experiment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(2), pages 341-368, June.
    11. Richard Carson & Jordan Louviere, 2011. "A Common Nomenclature for Stated Preference Elicitation Approaches," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(4), pages 539-559, August.
    12. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    13. David Hensher & Nina Shore & Kenneth Train, 2005. "Households’ Willingness to Pay for Water Service Attributes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(4), pages 509-531, December.
    14. Steffen Andersen & Glenn Harrison & Morten Lau & E. Rutström, 2009. "Elicitation using multiple price list formats," Experimental Economics, Springer;Economic Science Association, vol. 12(3), pages 365-366, September.
    15. Adamowicz W. & Louviere J. & Williams M., 1994. "Combining Revealed and Stated Preference Methods for Valuing Environmental Amenities," Journal of Environmental Economics and Management, Elsevier, vol. 26(3), pages 271-292, May.
    16. David Hensher & William Greene, 2003. "The Mixed Logit model: The state of practice," Transportation, Springer, vol. 30(2), pages 133-176, May.
    17. Richard G. Newell & Juha Siikamäki, 2014. "Nudging Energy Efficiency Behavior: The Role of Information Labels," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(4), pages 555-598.
    18. Riccardo Scarpa & Raffaele Zanoli & Viola Bruschi & Simona Naspetti, 2013. "Inferred and Stated Attribute Non-attendance in Food Choice Experiments," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(1), pages 165-180.
    19. John C. Whitehead & Subhrendu K. Pattanayak & George L. Van Houtven & Brett R. Gelso, 2008. "Combining Revealed And Stated Preference Data To Estimate The Nonmarket Value Of Ecological Services: An Assessment Of The State Of The Science," Journal of Economic Surveys, Wiley Blackwell, vol. 22(5), pages 872-908, December.
    20. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, November.
    21. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132-132.
    22. W. J. Wouter Botzen & Jeroen C. J. M. Van Den Bergh, 2012. "Monetary Valuation Of Insurance Against Flood Risk Under Climate Change," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(3), pages 1005-1026, August.
    23. Klaus Glenk & Sergio Colombo, 2013. "Modelling outcome-related risk in choice experiments," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(4), pages 559-578, October.
    24. Daniel A. Brent & Lata Gangadharan & Anke Leroux & Paul A. Raschky, 2014. "Putting One's Money Where One's Mouth is: Increasing Saliency in the Field," Monash Economics Working Papers 43-14, Monash University, Department of Economics.
    25. Jinkwon Lee & Uk Hwang, 2016. "Hypothetical Bias in Risk Preferences as a Driver of Hypothetical Bias in Willingness to Pay: Experimental Evidence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(4), pages 789-811, December.
    26. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
    27. Daniel R. Petrolia & Craig E. Landry & Keith H. Coble, 2013. "Risk Preferences, Risk Perceptions, and Flood Insurance," Land Economics, University of Wisconsin Press, vol. 89(2), pages 227-245.
    28. 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.
    29. Uri Gneezy & Andreas Leibbrandt & John A. List, 2016. "Ode to the Sea: Workplace Organizations and Norms of Cooperation," Economic Journal, Royal Economic Society, vol. 126(595), pages 1856-1883, September.
    30. Charness, Gary & Gneezy, Uri & Imas, Alex, 2013. "Experimental methods: Eliciting risk preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 87(C), pages 43-51.
    31. Chetan Dave & Catherine Eckel & Cathleen Johnson & Christian Rojas, 2010. "Eliciting risk preferences: When is simple better?," Journal of Risk and Uncertainty, Springer, vol. 41(3), pages 219-243, December.
    32. Kevin J. Boyle & Jeffrey M. Wooldridge, 2018. "Understanding Error Structures and Exploiting Panel Data in Meta-analytic Benefit Transfers," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(3), pages 609-635, March.
    33. Hidrue, Michael K. & Parsons, George R. & Kempton, Willett & Gardner, Meryl P., 2011. "Willingness to pay for electric vehicles and their attributes," Resource and Energy Economics, Elsevier, vol. 33(3), pages 686-705, September.
    34. Fehr, Ernst & Leibbrandt, Andreas, 2011. "A field study on cooperativeness and impatience in the Tragedy of the Commons," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1144-1155, October.
    35. List, John A. & Shogren, Jason F., 1998. "Calibration of the difference between actual and hypothetical valuations in a field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 37(2), pages 193-205, October.
    36. Jayson L. Lusk & Keith H. Coble, 2005. "Risk Perceptions, Risk Preference, and Acceptance of Risky Food," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(2), pages 393-405.
    37. Cameron, Trudy Ann & DeShazo, J.R., 2013. "Demand for health risk reductions," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 87-109.
    38. Kelly Fielding & John Gardner & Zoe Leviston & Jennifer Price, 2015. "Comparing Public Perceptions of Alternative Water Sources for Potable Use: The Case of Rainwater, Stormwater, Desalinated Water, and Recycled Water," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 29(12), pages 4501-4518, September.
    39. Fredrik Carlsson & Mitesh Kataria & Elina Lampi, 2010. "Dealing with Ignored Attributes in Choice Experiments on Valuation of Sweden’s Environmental Quality Objectives," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 47(1), pages 65-89, September.
    40. Petrolia, Daniel R., 2016. "Risk preferences, risk perceptions, and risky food," Food Policy, Elsevier, vol. 64(C), pages 37-48.
    41. Rosa Duarte & Vicente Pinilla & Ana Serrano, 2014. "Looking backward to look forward: water use and economic growth from a long-term perspective," Applied Economics, Taylor & Francis Journals, vol. 46(2), pages 212-224, January.
    42. Elaine M. Liu, 2013. "Time to Change What to Sow: Risk Preferences and Technology Adoption Decisions of Cotton Farmers in China," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1386-1403, October.
    43. Botzen, W.J.W. & van den Bergh, J.C.J.M., 2012. "Risk attitudes to low-probability climate change risks: WTP for flood insurance," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 151-166.
    44. Roberts, David C. & Boyer, Tracy A. & Lusk, Jayson L., 2008. "Preferences for environmental quality under uncertainty," Ecological Economics, Elsevier, vol. 66(4), pages 584-593, July.
    45. Anderson, Lisa R. & Mellor, Jennifer M., 2008. "Predicting health behaviors with an experimental measure of risk preference," Journal of Health Economics, Elsevier, vol. 27(5), pages 1260-1274, September.
    46. 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.
    47. Danny Campbell & David A. Hensher & Riccardo Scarpa, 2011. "Non-attendance to attributes in environmental choice analysis: a latent class specification," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 54(8), pages 1061-1076, December.
    48. Jason F. Shogren & John A. Fox, 1996. "Consumer Preferences for Fresh Food Items with Multiple Quality Attributes: Evidence from an Experimental Auction of Pork Chops," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 916-923.
    49. Sheila M. Olmstead, 2010. "The Economics of Managing Scarce Water Resources," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(2), pages 179-198, Summer.
    50. Roger H. von Haefen & D. Matthew Massey & Wiktor L. Adamowicz, 2005. "Serial Nonparticipation in Repeated Discrete Choice Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 1061-1076.
    51. Cavalcanti, Carina & Engel, Stefanie & Leibbrandt, Andreas, 2013. "Social integration, participation, and community resource management," Journal of Environmental Economics and Management, Elsevier, vol. 65(2), pages 262-276.
    52. Glenn W. Harrison & Eric Johnson & Melayne M. McInnes & E. Elisabet Rutström, 2005. "Risk Aversion and Incentive Effects: Comment," American Economic Review, American Economic Association, vol. 95(3), pages 897-901, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zheng Li, 2020. "Experimental Evidence on Socioeconomic Differences in Risk‐Taking and Risk Premiums," The Economic Record, The Economic Society of Australia, vol. 96(313), pages 140-152, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. 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.
    3. Hangjian Wu & Emmanouil Mentzakis & Marije Schaafsma, 2022. "Exploring Different Assumptions about Outcome-Related Risk Perceptions in Discrete Choice Experiments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 81(3), pages 531-572, March.
    4. 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.
    5. Schleich, Joachim & Gassmann, Xavier & Meissner, Thomas & Faure, Corinne, 2019. "A large-scale test of the effects of time discounting, risk aversion, loss aversion, and present bias on household adoption of energy-efficient technologies," Energy Economics, Elsevier, vol. 80(C), pages 377-393.
    6. 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.
    7. Alejandro Arrieta & Ariadna García‐Prado & Paula González & José Luis Pinto‐Prades, 2017. "Risk attitudes in medical decisions for others: An experimental approach," Health Economics, John Wiley & Sons, Ltd., vol. 26(S3), pages 97-113, December.
    8. Chèze, Benoît & David, Maia & Martinet, Vincent, 2020. "Understanding farmers' reluctance to reduce pesticide use: A choice experiment," Ecological Economics, Elsevier, vol. 167(C).
    9. Galarza, Francisco, 2009. "Choices under Risk in Rural Peru," MPRA Paper 17708, University Library of Munich, Germany.
    10. Julia Ihli, Hanna & Chiputwa, Brian & Winter, Etti & Gassner, Anja, 2022. "Risk and time preferences for participating in forest landscape restoration: The case of coffee farmers in Uganda," World Development, Elsevier, vol. 150(C).
    11. Tamás Csermely & Alexander Rabas, 2016. "How to reveal people’s preferences: Comparing time consistency and predictive power of multiple price list risk elicitation methods," Journal of Risk and Uncertainty, Springer, vol. 53(2), pages 107-136, December.
    12. Holzmeister, Felix & Stefan, Matthias, 2019. "The Risk Elicitation Puzzle Revisited: Across-Methods (In)consistency?," OSF Preprints pj9u2, Center for Open Science.
    13. Felix Holzmeister & Matthias Stefan, 2019. "The risk elicitation puzzle revisited: Across-methods (in)consistency?," Working Papers 2019-19, Faculty of Economics and Statistics, University of Innsbruck.
    14. Menkhoff, Lukas & Sakha, Sahra, 2017. "Estimating risky behavior with multiple-item risk measures," Journal of Economic Psychology, Elsevier, vol. 59(C), pages 59-86.
    15. Haghani, Milad & Bliemer, Michiel C.J. & Hensher, David A., 2021. "The landscape of econometric discrete choice modelling research," Journal of choice modelling, Elsevier, vol. 40(C).
    16. Meraner, Manuela & Musshoff, Oliver & Finger, Robert, 2018. "Using involvement to reduce inconsistencies in risk preference elicitation," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 73(C), pages 22-33.
    17. Sahan T. M. Dissanayake & Andrew G. Meyer, 2021. "Incorporating Beliefs and Experiences into Choice Experiment Analysis: Implications for Policy Recommendations," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(2), pages 823-848, June.
    18. Makriyannis, Christos & Johnston, Robert, 2016. "Welfare Analysis for Climate Risk Reductions: Are Current Treatments of Outcome Uncertainty Sufficient?," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235532, Agricultural and Applied Economics Association.
    19. Verschoor, Arjan & D’Exelle, Ben & Perez-Viana, Borja, 2016. "Lab and life: Does risky choice behaviour observed in experiments reflect that in the real world?," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 134-148.
    20. Galizzi, Matteo M. & Machado, Sara R. & Miniaci, Raffaele, 2016. "Temporal stability, cross-validity, and external validity of risk preferences measures: experimental evidence from a UK representative sample," LSE Research Online Documents on Economics 67554, London School of Economics and Political Science, LSE Library.

    More about this item

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uwp:landec:v:95:y:2019:i:4:p:494-514. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://le.uwpress.org/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: http://le.uwpress.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.