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Climate Change Risk, and Human Behavior: Theory and Evidence

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  • Sanjit Dhami
  • Narges Hajimoladarvish
  • Pavan Mamidi

Abstract

A group of decision makers simultaneously make contributions towards a green fund that reduces the future probability of a climate catastrophe. We derive the theoretical predictions of the effects on contributions arising from `behavioral parameters' such as loss aversion and present-bias; `structural factors' such as variation in the timing of uncertainty; the `demand for a commitment device'; and `institutional factors' such as comparing voluntary contributions with mandatory tax financed contributions. We then run experiments to stringently test our predictions. Loss aversion and present-bias reduce contributions; there is demand for the commitment technology; and voluntary contributions are higher relative to mandatory tax-financed contributions.

Suggested Citation

  • Sanjit Dhami & Narges Hajimoladarvish & Pavan Mamidi, 2023. "Climate Change Risk, and Human Behavior: Theory and Evidence," CESifo Working Paper Series 10678, CESifo.
    • Handle: RePEc:ces:ceswps:_10678
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    References listed on IDEAS

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    More about this item

    Keywords

    climate risk abatement; loss aversion; present-biased preferences; voluntary versus mandatory contribution mechanisms; commitment technology;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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