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The Effects of Experience on Preferences: Theory and Empirics for Environmental Public Goods

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  • Mikolaj Czajkowski

    (Faculty of Economic Sciences, University of Warsaw, Poland)

  • Nick Hanley

    () (School of Geography and Sustainable Development, University of St. Andrews)

  • Jacob LaRiviere

    (Department of Economics, University of Tennessee)

Abstract

This paper develops a choice model for environmental public goods which allows for consumers to learn about their 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. Our main findings are that in a Random Utility Model (RUM) discrete choice model, a subject’s scale should increase and the variability of scale should decrease with experience if subjects are Bayesians. We then estimate the model using field data regarding preferences for one particular public good, water quality. We find strong evidence that additional experience increases scale, thereby makes consumer preferences more predictable from the econometrician’s perspective. We find supportive but less convincing evidence that experience decreases the variability of scale across subjects.

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  • Mikolaj Czajkowski & Nick Hanley & Jacob LaRiviere, 2014. "The Effects of Experience on Preferences: Theory and Empirics for Environmental Public Goods," Discussion Papers in Environment and Development Economics 2014-05, University of St. Andrews, School of Geography and Sustainable Development.
  • Handle: RePEc:sss:wpaper:2014-05
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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. Bartkowski, Bartosz, 2016. "Are diverse ecosystems more valuable? A conceptual framework for economic valuation of biodiversity," UFZ Discussion Papers 9/2016, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    3. Stefano Carattini & Andrea Baranzini & Philippe Thalmann & Frédéric Varone & Frank Vöhringer, 2017. "Green Taxes in a Post-Paris World: Are Millions of Nays Inevitable?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(1), pages 97-128, September.
    4. repec:eee:eneeco:v:65:y:2017:i:c:p:326-334 is not listed on IDEAS
    5. repec:eee:eejocm:v:24:y:2017:i:c:p:36-50 is not listed on IDEAS
    6. Nick Hanley & Mikołaj Czajkowski, 2017. "Stated Preference valuation methods: an evolving tool for understanding choices and informing policy," Working Papers 2017-01, Faculty of Economic Sciences, University of Warsaw.
    7. Bartczak, Anna & Chilton, Susan & Czajkowski, Mikołaj & Meyerhoff, Jürgen, 2017. "Gain and loss of money in a choice experiment. The impact of financial loss aversion and risk preferences on willingness to pay to avoid renewable energy externalities," Energy Economics, Elsevier, vol. 65(C), pages 326-334.
    8. 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.
    9. Michela Faccioli & Mikołaj Czajkowski & Klaus Glenk & Julia Martin-Ortega, 2018. "Environmental attitudes and place identity as simultaneous determinants of preferences for environmental goods," Working Papers 2018-08, Faculty of Economic Sciences, University of Warsaw.
    10. Tobias Börger & Oliver Frör & Sören Weiß, 2017. "The relationship between perceived difficulty and randomness in discrete choice experiments: Investigating reasons for and consequences of difficulty," Discussion Papers in Environment and Development Economics 2017-03, University of St. Andrews, School of Geography and Sustainable Development.
    11. repec:bla:jageco:v:68:y:2017:i:3:p:781-800 is not listed on IDEAS
    12. Enni Ruokamo & Mikołaj Czajkowski & Nick Hanley & Artti Juutinen & Rauli Svento, 2016. "Linking perceived choice complexity with scale heterogeneity in discrete choice experiments: home heating in Finland," Working Papers 2016-30, Faculty of Economic Sciences, University of Warsaw.
    13. Völker, Marc & Lienhoop, Nele, 2016. "Exploring group dynamics in deliberative choice experiments," Ecological Economics, Elsevier, vol. 123(C), pages 57-67.
    14. Czajkowski, Mikołaj & Barczak, Anna & Budziński, Wiktor & Giergiczny, Marek & Hanley, Nick, 2016. "Preference and WTP stability for public forest management," Forest Policy and Economics, Elsevier, vol. 71(C), pages 11-22.
    15. Krucien, Nicolas & Ryan, Mandy & Hermens, Frouke, 2017. "Visual attention in multi-attributes choices: What can eye-tracking tell us?," Journal of Economic Behavior & Organization, Elsevier, vol. 135(C), pages 251-267.
    16. Czyżewski, Bazyli, 2016. "Political Rents of European Farmers in the Sustainable Development Paradigm. International, national and regional perspective," MPRA Paper 74253, University Library of Munich, Germany.
    17. Czyżewski, Bazyli & Trojanek, Radosław, 0. "Drivers of agricultural land prices in terms of different functions of rural areas in Poland," Problems of Agricultural Economics, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI).
    18. repec:eee:ecoser:v:24:y:2017:i:c:p:50-57 is not listed on IDEAS
    19. repec:gii:ciesrp:cies_rp_36rev is not listed on IDEAS
    20. Mikołaj Czajkowski & Nick Hanley & Jacob LaRiviere & William S. Neilson & Katherine Simpson, 2016. "Information and Learning in Stated-Preference Studies," Working Papers 2016-20, Faculty of Economic Sciences, University of Warsaw.

    More about this item

    Keywords

    Bayesian updating; choice experiment; learning; scale; scale variance;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate

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