Incorporating outcome uncertainty and prior outcome beliefs in stated preferences

T. Lundhede, J.B. Jacobsen, N. Hanley, N. Strange, B.J. Thorsen

    Research output: Contribution to journalArticlepeer-review

    51 Citations (Scopus)

    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.
    Original languageEnglish
    Pages (from-to)296-316
    Number of pages21
    JournalLand Economics
    Volume91
    Issue number2
    DOIs
    Publication statusPublished - May 2015

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