The incorporation of subjective risks into choice experiments to test scenario adjustment
In choice experiment (CE) applications, subjects are typically assumed to fully accept information given in the status quo (SQ) alternative, however, subjects might adjust such information on the basis of their subjective beliefs. This phenomenon is known as scenario adjustment. By using a CE field survey, we investigate whether subjects adjust risks portrayed in the SQ using their subjective estimates via a two-stage approach. In the first stage, subjective risks are elicited using the exchangeability method. In the second stage, two treatment groups are designed. In the first group, each subject is presented with a SQ which incorporates her/his own subjective risk estimate, and, hence, no adjustment is required. In the second group, each subject faces a SQ where the presented risk is not consistent with her/his own estimate, and, hence, a mental adjustment to the scenario might take place. Our modeling results suggest that subjects who are provided with a SQ in which the risk is lower than their own subjective estimates have a higher maximum willingness to pay (WTP) for a risk reduction than subjects provided with a SQ where the risk is consistent with their perceptions. Hence, in this case the scenario adjustment takes place. In contrast, subjects who are presented with a SQ where the risk is higher than their subjective estimates, overreact to the risk information, and have a higher WTP for the risk reduction than subjects who face a SQ where the presented risk is consistent with their perceived risks. Hence, in this case they appear to go along with the information in the SQ and abandon their subjective estimate
|Date of creation:||Jun 2013|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.aieaa.org/|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Trudy Ann Cameron, 2002.
"Individual Option Prices for Climate Change Mitigation,"
University of Oregon Economics Department Working Papers
2003-9, University of Oregon Economics Department, revised 20 Jul 2002.
- Cameron, Trudy Ann, 2005. "Individual option prices for climate change mitigation," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 283-301, February.
- Viscusi, W Kip, 1990. "Do Smokers Underestimate Risks?," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1253-69, December.
- Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2, September.
- Travisi, Chiara Maria & Nijkamp, Peter, 2008. "Valuing environmental and health risk in agriculture: A choice experiment approach to pesticides in Italy," Ecological Economics, Elsevier, vol. 67(4), pages 598-607, November.
- Carl S. Spetzler & Carl-Axel S. Staël Von Holstein, 1975. "Exceptional Paper--Probability Encoding in Decision Analysis," Management Science, INFORMS, vol. 22(3), pages 340-358, November.
- Cerroni, Simone & Shaw, W. Douglass, 2012. "Does climate change information affect stated risks of pine beetle impacts on forests? An application of the exchangeability method," Forest Policy and Economics, Elsevier, vol. 22(C), pages 72-84.
- Viscusi, W Kip, 1985. "Are Individuals Bayesian Decision Makers?," American Economic Review, American Economic Association, vol. 75(2), pages 381-85, May.
- Hensher, David A. & Greene, William H. & Li, Zheng, 2011. "Embedding risk attitude and decision weights in non-linear logit to accommodate time variability in the value of expected travel time savings," Transportation Research Part B: Methodological, Elsevier, vol. 45(7), pages 954-972, August.
- Steffen Andersen & Glenn Harrison & Morten Lau & E. RutstrÃ¶m, 2006.
"Elicitation using multiple price list formats,"
Springer, vol. 9(4), pages 383-405, December.
- Florax, Raymond J.G.M. & Travisi, Chiara M. & Nijkamp, Peter, 2005.
"A Meta-Analysis of the Willingness to Pay for Reductions in Pesticide Risk Exposure,"
2005 Annual meeting, July 24-27, Providence, RI
19524, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Raymond J. G. M. Florax & Chiara M. Travisi & Peter Nijkamp, 2005. "A meta-analysis of the willingness to pay for reductions in pesticide risk exposure," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 32(4), pages 441-467, December.
- Chiara M. Travisi & Peter Nijkamp & Raymond J. G. M. Florax, 2004. "A Meta-Analysis of the Willingness to Pay for Reductions in Pesticide Risk Exposure," Working Papers 2004.101, Fondazione Eni Enrico Mattei.
- David Hensher & William Greene, 2003. "The Mixed Logit model: The state of practice," Transportation, Springer, vol. 30(2), pages 133-176, May.
- Ferrini, Silvia & Scarpa, Riccardo, 2007. "Designs with a priori information for nonmarket valuation with choice experiments: A Monte Carlo study," Journal of Environmental Economics and Management, Elsevier, vol. 53(3), pages 342-363, May.
- Peter Wakker & Daniel Deneffe, 1996. "Eliciting von Neumann-Morgenstern Utilities When Probabilities Are Distorted or Unknown," Management Science, INFORMS, vol. 42(8), pages 1131-1150, August.
- David A. Hensher & Zheng Li, 2012. "Valuing Travel Time Variability within a Rank-Dependent Utility Framework and an Investigation of Unobserved Taste Heterogeneity," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 46(2), pages 293-312, May.
- Stephane Hess & John Rose, 2009. "Should Reference Alternatives in Pivot Design SC Surveys be Treated Differently?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 42(3), pages 297-317, March.
- Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2008. "Eliciting Risk and Time Preferences," Econometrica, Econometric Society, vol. 76(3), pages 583-618, 05.
- Riccardo Scarpa & Sandra Notaro & Jordan Louviere & Roberta Raffaelli, 2010. "Exploring Scale Effects of Best/Worst Rank Ordered Choice Data to Estimate Benefits of Tourism in Alpine Grazing Commons," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(3), pages 809-824.
- Mohammed Abdellaoui & Aurelien Baillon & Laetitia Placido & Peter P. Wakker, 2011. "The Rich Domain of Uncertainty: Source Functions and Their Experimental Implementation," American Economic Review, American Economic Association, vol. 101(2), pages 695-723, April.
- Cerroni, Simone & Notaro, Sandra & Shaw, W. Douglass, 2012. "Eliciting and estimating valid subjective probabilities: An experimental investigation of the exchangeability method," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 201-215.
- Daniel Burghart & Trudy Cameron & Geoffrey Gerdes, 2007. "Valuing publicly sponsored research projects: Risks, scenario adjustments, and inattention," Journal of Risk and Uncertainty, Springer, vol. 35(1), pages 77-105, August.
- Viscusi, W Kip, 1997. "Alarmist Decisions with Divergent Risk Information," Economic Journal, Royal Economic Society, vol. 107(445), pages 1657-70, November.
When requesting a correction, please mention this item's handle: RePEc:ags:aiea13:149894. 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: (AgEcon Search)
If references are entirely missing, you can add them using this form.