Exploring Different Assumptions about Outcome-Related Risk Perceptions in Discrete Choice Experiments

Hangjian Wu (), Emmanouil Mentzakis and Marije Schaafsma
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Hangjian Wu: University of Aberdeen
Marije Schaafsma: VU University Amsterdam

Environmental & Resource Economics, 2022, vol. 81, issue 3, No 6, 572 pages

Abstract: Abstract Environmental outcomes are often affected by the stochastic nature of the environment and ecosystem, as well as the effectiveness of governmental policy in combination with human activities. Incorporating information about risk in discrete choice experiments has been suggested to enhance survey credibility. Although some studies have incorporated risk in the design and treated it as either the weights of the corresponding environmental outcomes or as a stand-alone factor, little research has discussed the implications of those behavioural assumptions under risk and explored individuals’ outcome-related risk perceptions in a context where environmental outcomes can be either described as improvement or deterioration. This paper investigates outcome-related risk perceptions for environmental outcomes in the gain and loss domains together and examines differences in choices about air quality changes in China using a discrete choice experiment. Results suggest that respondents consider the information of risk in both domains, and their elicited behavioural patterns are best described by direct risk aversion, which states that individuals obtain disutility directly from the increasing risk regardless of the associated environmental outcomes. We discuss the implication of our results and provide recommendations on the choice of model specification when incorporating risk.

Keywords: Air quality; Direct risk aversion; Discrete choice experiment; Outcome-related risk perceptions; Prospect theory (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10640-021-00638-x

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