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Scale Perception Bias in the Valuation of Environmental Risks

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  • Jorge E. Arana

    (Applied Economic Analysis Department - ULPGC - University of Las Palmas de Gran Canaria, ARE - Department of Agricultural and Resource Economics [Berkeley] - UC Berkeley - University of California [Berkeley] - UC - University of California)

  • Carmelo León

    (Applied Economic Analysis - ULPGC - University of Las Palmas de Gran Canaria)

Abstract

The valuation of environmental risks is commonly approached with the utilization of stated preference methods such as contingent valuation. In these methods, money is utilized as the scale that reflects the individual's underlying utility function. However, this scale can vary across individuals due to different perceptions on what are the right or appropriate bounds for willingness to pay. In this paper we test for scale perception bias and propose a correction method based on the utilization of anchoring vignettes that define different degrees of preference for the non-market good. The proposed method is applied to study he commonly found anomaly "probability neglect", which is defined by the insensitivity to the probability levels in the valuation of environmental risks. The results show that probability neglect is reduced when willingness to pay responses are corrected for self-perception bias through the utilization of the anchoring vignettes approach.

Suggested Citation

  • Jorge E. Arana & Carmelo León, 2011. "Scale Perception Bias in the Valuation of Environmental Risks," Post-Print hal-00701866, HAL.
    • Handle: RePEc:hal:journl:hal-00701866
    DOI: 10.1080/00036846.2011.566188
    Note: View the original document on HAL open archive server: https://hal.science/hal-00701866
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    References listed on IDEAS

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