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The Effects of Experience on Preference Uncertainty: Theory and Empirics for Public and Quasi-Public Environmental Goods

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  • Czajkowski, Mikolaj
  • Hanley, Nicholas
  • LaRiviere, Jacob

Abstract

This paper develop and estimates a model of demand estimation for environmental public goods which allows for consumers to learn about their preferences through consumption experiences. We develop a theoretical model of Bayesian updating, perform comparative statics over the model, and show how the theoretical model can be consistently incorporated into a reduced form econometric model. We then estimate the model using data collected for two environmental goods. We find that the predictions of the theoretical exercise that additional experience makes consumers more certain over their preferences in both mean and variance are supported in each cas e.

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  • Czajkowski, Mikolaj & Hanley, Nicholas & LaRiviere, Jacob, 2013. "The Effects of Experience on Preference Uncertainty: Theory and Empirics for Public and Quasi-Public Environmental Goods," Stirling Economics Discussion Papers 2013-11, University of Stirling, Division of Economics.
    • Handle: RePEc:stl:stledp:2013-11
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    Cited by:

    1. Mikołaj Czajkowski & Nick Hanley & Karine Nyborg, 2014. "Social norms, morals and self-interest as determinants of pro-environment behaviour," Working Papers 2014-17, Faculty of Economic Sciences, University of Warsaw.
    2. Nick Hanley & Christopher Boyce & Mikołaj Czajkowski & Steve Tucker & Charles Noussair & Michael Townsend, 2017. "Sad or Happy? The Effects of Emotions on Stated Preferences for Environmental Goods," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(4), pages 821-846, December.
    3. LaRiviere, Jacob & Czajkowski, Mikolaj & Hanley, Nick & Aanesen, Margrethe & Falk-Peterson, Jannike & Tinch, Dugald, 2014. "Effects of Experience, Knowledge and Signals on Willingness to Pay for a Public Good," SIRE Discussion Papers 2014-008, Scottish Institute for Research in Economics (SIRE).
    4. Atkinson, Giles & Groom, Ben & Hanley, Nicholas & Mourato, Susana, 2018. "Environmental Valuation and Benefit-Cost Analysis in U.K. Policy," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 9(1), pages 97-119, April.
    5. Pierre-Alexandre Mahieu & François-Charles Wolff & Jason Shogren & Pascal Gastineau, 2017. "Interval bidding in a distribution elicitation format," Applied Economics, Taylor & Francis Journals, vol. 49(51), pages 5200-5211, November.
    6. Czajkowski, Mikolaj & Hanley, Nick & LaRiviere, Jacob & Simpson, Katherine, 2014. "What is the Causal Effect of Information and Learning about a Public Good on Willingness to Pay?," SIRE Discussion Papers 2014-009, Scottish Institute for Research in Economics (SIRE).
    7. Tobias Börger & Joseph Cook, 2016. "Giving respondents “time to think” reduces response randomness in repeated discrete choice tasks," Discussion Papers in Environment and Development Economics 2016-13, University of St. Andrews, School of Geography and Sustainable Development.
    8. Aanesen, Margrethe & Armstrong, Claire & Czajkowski, Mikołaj & Falk-Petersen, Jannike & Hanley, Nick & Navrud, Ståle, 2015. "Willingness to pay for unfamiliar public goods: Preserving cold-water coral in Norway," Ecological Economics, Elsevier, vol. 112(C), pages 53-67.

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    Keywords

    discrete choice experiment; preference learning; stated preferences; Bayesian updating; generalized multinomial logit; scale; scale variance;
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