Incorporating outcome uncertainty and prior outcome beliefs in stated preferences

Lundhede, T., Jacobsen, J. B., Hanley, N. , Strange, N. and Thorsen, B. J. (2015) Incorporating outcome uncertainty and prior outcome beliefs in stated preferences. Land Economics, 91(2), pp. 296-316. (doi: 10.3368/le.91.2.296)

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.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Hanley, Professor Nicholas
• Authors: Lundhede, T., Jacobsen, J. B., Hanley, N., Strange, N., and Thorsen, B. J.
• College/School: College of Medical Veterinary and Life Sciences > School of Biodiversity, One Health & Veterinary Medicine
• Journal Name: Land Economics
• Publisher: University of Wisconsin Press
• ISSN: 0023-7639
• ISSN (Online): 1543-8325