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The effects of experience on preference uncertainty: theory and empirics for environmental goods

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  • Czajkowski, Mikołaj
  • Hanley, Nick
  • LaRiviere, Jacob

Abstract

This paper develops a model of demand estimation in which consumers learn about their true preferences through consumption experiences. We develop a theoretical model of Bayesian updating, perform comparative statics over the model, and show how the theoretical model can be consistently incorporated into a reduced form econometric model. We then estimate the model using data collected for two quasi-public goods. We find that the predictions of the theoretical exercise that additional experience with a good will make consumers more certain over their preferences in both mean and variance are supported in each case.

Suggested Citation

  • Czajkowski, Mikołaj & Hanley, Nick & LaRiviere, Jacob, 2013. "The effects of experience on preference uncertainty: theory and empirics for environmental goods," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152155, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare13:152155
    DOI: 10.22004/ag.econ.152155
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    Citations

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    Cited by:

    1. Lanz, Bruno & Provins, Allan, 2017. "Using averting expenditures to estimate the demand for public goods: Combining objective and perceived quality," Resource and Energy Economics, Elsevier, vol. 47(C), pages 20-35.
    2. Tobias Börger, 2016. "Are Fast Responses More Random? Testing the Effect of Response Time on Scale in an Online Choice Experiment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(2), pages 389-413, October.
    3. LaRiviere, Jacob & Czajkowski, Mikołaj & Hanley, Nick & Aanesen, Margrethe & Falk-Petersen, Jannike & Tinch, Dugald, 2014. "The value of familiarity: Effects of knowledge and objective signals on willingness to pay for a public good," Journal of Environmental Economics and Management, Elsevier, vol. 68(2), pages 376-389.
    4. Mikołaj Czajkowski & Nick Hanley & Karine Nyborg, 2014. "Social norms, morals and self-interest as determinants of pro-environment behaviour," Working Papers 2014-17, Faculty of Economic Sciences, University of Warsaw.
    5. Nick Hanley & Mikolaj Czajkowski, 2016. "What is the Causal Impact of Knowledge on Preferences in Stated Preference Studies?," Discussion Papers in Environment and Development Economics 2016-09, University of St. Andrews, School of Geography and Sustainable Development.
    6. Jacob LaRiviere & Mikolaj Czajkowski & Nick Hanley & Katherine Simpson, 2015. "What is the Causal Effect of Knowledge on Preferences?," Discussion Papers in Environment and Development Economics 2015-09, University of St. Andrews, School of Geography and Sustainable Development.
    7. LaRiviere, Jacob & Czajkowski, Mikolaj & Hanley, Nick & Aanesen, Margrethe & Falk-Peterson, Jannike & Tinch, Dugald, 2014. "Effects of Experience, Knowledge and Signals on Willingness to Pay for a Public Good," SIRE Discussion Papers 2014-008, Scottish Institute for Research in Economics (SIRE).
    8. Pierre-Alexandre Mahieu & François-Charles Wolff & Jason Shogren & Pascal Gastineau, 2017. "Interval bidding in a distribution elicitation format," Applied Economics, Taylor & Francis Journals, vol. 49(51), pages 5200-5211, November.
    9. Czajkowski, Mikolaj & Hanley, Nick & LaRiviere, Jacob & Simpson, Katherine, 2014. "What is the Causal Effect of Information and Learning about a Public Good on Willingness to Pay?," SIRE Discussion Papers 2014-009, Scottish Institute for Research in Economics (SIRE).

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    Keywords

    Environmental Economics and Policy; Institutional and Behavioral Economics; Research and Development/Tech Change/Emerging Technologies;
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