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The Effects of Experience on Preference Uncertainty: Theory and Empirics for Public and Quasi-Public Goods

Author

Listed:
  • Mikołaj Czajkowski

    (University of Warsaw, Faculty of Economic Sciences)

  • Nick Hanley

    (Economics Division University of Stirling)

  • Jacob LaRiviere

    (Department of Economics University of Tennessee)

Abstract

This paper develops a model of demand estimation in which consumers learn about their true 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. We then estimate the model using data collected for two quasi-public goods. We find that the predictions of the theoretical exercise that additional experience with a good will make consumers more certain over their preferences in both mean and variance are supported in each case.

Suggested Citation

  • Mikołaj Czajkowski & Nick Hanley & Jacob LaRiviere, 2012. "The Effects of Experience on Preference Uncertainty: Theory and Empirics for Public and Quasi-Public Goods," Working Papers 2012-15, Faculty of Economic Sciences, University of Warsaw.
    • Handle: RePEc:war:wpaper:2012-15
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    File URL: http://www.wne.uw.edu.pl/inf/wyd/WP/WNE_WP81.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    The support of the Polish Ministry of Science and Higher Education and the Foundation for Polish Science is gratefully acknowledged.;

    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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