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The Effect of Power Outages and Cheap Talk on Willingness to Pay to Reduce Outages

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Listed:
  • Carlsson, Fredrik

    () (University of Gothenburg)

  • Martinsson, Peter

    () (University of Gothenburg)

  • Akay, Alpaslan

    () (University of Gothenburg)

Abstract

Using an open-ended contingent valuation survey, we analyze how (i) experience of a power outage due to one of the worst storms ever to hit Sweden and (ii) a cheap talk script affect respondents' WTP to avoid power outages. Experience significantly increases and a cheap talk script decreases the proportion of respondents with zero WTP. There is no significant effect in either case on stated WTP conditional on a positive WTP. The paper concludes with a discussion on the use of valuation studies shortly after the occurrence of an undesirable event.

Suggested Citation

  • Carlsson, Fredrik & Martinsson, Peter & Akay, Alpaslan, 2009. "The Effect of Power Outages and Cheap Talk on Willingness to Pay to Reduce Outages," IZA Discussion Papers 4307, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp4307
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    More about this item

    Keywords

    experience; power outages; contingent valuation; cheap talk;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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