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

Mikolaj Czajkowski, Nick Hanley () and Jacob LaRiviere
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Nick Hanley: School of Geography and Sustainable Development, University of St. Andrews

No 2014-05, Discussion Papers in Environment and Development Economics from University of St. Andrews, School of Geography and Sustainable Development

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.

Keywords: Bayesian updating; choice experiment; learning; scale; scale variance (search for similar items in EconPapers)
JEL-codes: C51 D83 H43 Q51 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2014-09
New Economics Papers: this item is included in nep-dcm, nep-env, nep-pol and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Journal Article: The Effects of Experience on Preferences: Theory and Empirics for Environmental Public Goods (2015)
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