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Incorporating Outcome Uncertainty and Prior Outcome Beliefs in Stated Preferences

Incorporating Outcome Uncertainty and Prior Outcome Beliefs in Stated Preferences 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Land Economics University of Wisconsin Press

Incorporating Outcome Uncertainty and Prior Outcome Beliefs in Stated Preferences

Land Economics , Volume 91 (2) – Apr 13, 2015

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Publisher
University of Wisconsin Press
Copyright
Copyright by the Board of Regents of the University of Wisconsin System.
ISSN
1543-8325
Publisher site
See Article on Publisher Site

Abstract

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.

Journal

Land EconomicsUniversity of Wisconsin Press

Published: Apr 13, 2015

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