Incorporating Outcome Uncertainty and Prior Outcome Beliefs in Stated Preferences

Thomas Lundhede, Jette Bredahl Jacobsen, Nick Hanley, Niels Strange and Bo Thorsen

Land Economics, 2015, vol. 91, issue 2, 296-316

Abstract: Stated preference studies tell respondents that policies create environmental changes with varying levels of uncertainty. However, respondents may include their own a priori assessments of uncertainty when making choices among policy options. Using a choice experiment eliciting respondents’ preferences for conservation policies under climate change, we find that higher outcome uncertainty reduces utility. When accounting for endogeneity, we find that prior beliefs play a significant role in this cost of uncertainty. Thus, merely stating “objective†levels of outcome uncertainty will not necessarily solve the problem of people valuing something differently from originally intended: respondents’ prior beliefs must be accounted for.

JEL-codes: C53 D62 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (28)

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