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Waiting or acting now? The effect on willingness-to-pay of delivering inherent uncertainty information in choice experiments

Catalina M. Torres Figuerola (), Michela Faccioli and Antoni Riera Font

Ecological Economics, 2017, vol. 131, issue C, 231-240

Abstract: This paper analyzes the effect of inherent uncertainty on the willingness-to-pay (WTP) for a policy aimed at reducing expected climate change impacts. To do this, it relates outcome uncertainty to the probability of occurrence of one of these impacts within a given time horizon. Unlike the existing studies, this paper links outcome uncertainty to the uncontrollable component of environmental uncertainty derived from the stochastic nature of an ecosystem's behavior. Results show that the WTP for the policy in the presence of uncertainty does not decrease compared to the scenario where climate change impacts are assumed to occur with certainty. This suggests individuals are adopting a precautionary attitude when stating their WTP. Thus, the paper provides economic justification for preventive measures in highly uncertain contexts. However, findings are not conclusive with respect to the influence of the degree of uncertainty on the support for such measures.

Keywords: Preference analysis; Inherent uncertainty; Choice experiment; Adaptation; Climate change; Precautionary principle (search for similar items in EconPapers)
JEL-codes: D6 D81 Q20 Q51 Q54 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Waiting or acting now? The effects on willingness-to-pay of delivering inherent uncertainty information in choice experiments (2015) Downloads
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