Incorporating outcome uncertainty and prior outcome beliefs in stated preferences

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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.
Original languageEnglish
JournalLand Economics
Issue number2
Pages (from-to)296-316
Number of pages21
Publication statusPublished - 2015

ID: 153108340