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Impact framing and experience for determining acceptable levels of climate change risk: A lab experiment

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  • Ambika Markanday
  • Steffen Kallbekken and Ibon Galarraga

Abstract

This paper explores how individuals determine acceptable levels of risk (ALR) when making investment decisions on climate change adaptation. An incentivised lab experiment (n=161) is conducted on a sample of the Bilbao population. A 2x2 factorial between-subject design measures ALR in response to visual (photo vs. text-only) and numeric (single-value vs. range) impact framings. The effect of experience on ALR is also measured using a 2-period repeated game within-subject design. Findings support an extension of the dual processing model that argues people exert practical rationality, based on both objective reasoning and subjective experience, when making decisions over moral dilemmas, such as climate change. Subjects in visual conditions had lower ALR, due to greater negative affect, concern, and sense of personal duty and responsibility towards climate change. This suggests a moral judgement of the risk in question. The effect of the visual appeal was lower in the range condition, where greater mental effort led to more objective reasoning. Those that experienced damages in period 1 displayed lower ALR in period 2. No difference in ALR was found between periods for those that did not experience damages. The implications of these findings are discussed.

Suggested Citation

  • Ambika Markanday & Steffen Kallbekken and Ibon Galarraga, 2020. "Impact framing and experience for determining acceptable levels of climate change risk: A lab experiment," Working Papers 2020-02, BC3.
    • Handle: RePEc:bcc:wpaper:2020-02
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