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Effects of Experience, Knowledge and Signals on Willingness to Pay for a Public Good

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  • Aanesen, Margrethe
  • Czajkowski, Mikolaj
  • Falk-Peterson, Jannike
  • Hanley, Nicholas
  • LaRiviere, Jacob
  • Tinch, Dugald

Abstract

This paper compares how increases in experience versus increases in knowledge about a public good affect willingness to pay (WTP) for its provision. This is challenging because while consumers are often certain about their previous experiences with a good, they may be uncertain about the accuracy of their knowledge. We therefore design and conduct a field experiment in which treated subjects receive a precise and objective signal regarding their knowledge about a public good before estimating their WTP for it. Using data for two different public goods, we show qualitative equivalence of the effect of knowledge and experience on valuation for a public good. Surprisingly, though, we find that the causal effect of objective signals about the accuracy of a subject's knowledge for a public good can dramatically affect their valuation for it: treatment causes an increase of $150-$200 in WTP for well-informed individuals. We find no such effect for less informed subjects. Our results imply that WTP estimates for public goods are not only a function of true information states of the respondents but beliefs about those information states.

Suggested Citation

  • Aanesen, Margrethe & Czajkowski, Mikolaj & Falk-Peterson, Jannike & Hanley, Nicholas & LaRiviere, Jacob & Tinch, Dugald, 2014. "Effects of Experience, Knowledge and Signals on Willingness to Pay for a Public Good," Stirling Economics Discussion Papers 2014-04, University of Stirling, Division of Economics.
    • Handle: RePEc:stl:stledp:2014-04
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    References listed on IDEAS

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    Keywords

    Uncertainty; Choice Experiment; Information; Beliefs; Field Experiment; Valuation;
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