The Value of Familiarity: Effects of Experience, Knowledge and Signals on Willingness to Pay for a Public Good

Jacob LaRiviere, Mikolaj Czajkowski, Nick Hanley, Margrethe Aanesen (margrethe.aanesen@uit.no), Jannike Falk-Petersen (jannike.falk-petersen@uit.no) and Dugald Tinch (economics@stir.ac.uk)
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Margrethe Aanesen: Faculty of Biosciences, Fisheries and Economics, University of Tromso
Jannike Falk-Petersen: Faculty of Biosciences, Fisheries and Economics, University of Tromso
Dugald Tinch: Division of Economics, University of Stirling

No 2013-30, Working Papers from Faculty of Economic Sciences, University of Warsaw

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.

Keywords: Information; Beliefs; Field Experiment; Valuation; Uncertainty; Choice Experiment (search for similar items in EconPapers)
JEL-codes: C93 D83 Q51 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2013
New Economics Papers: this item is included in nep-cbe, nep-cta, nep-dcm and nep-exp
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Citations: View citations in EconPapers (4)

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http://www.wne.uw.edu.pl/inf/wyd/WP/WNE_WP115.pdf First version, 2013 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:war:wpaper:2013-30

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