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What is the Causal Effect of Knowledge on Preferences?

Author

Listed:
  • Jacob LaRiviere

    (Department of Economics, University of Tennessee)

  • Mikołaj Czajkowski

    (Faculty of Economic Sciences, University of Warsaw)

  • Nick Hanley

    (Department of Geography and Sustainable Development, University of St Andrews)

  • Katherine Simpson

    (Economics Division, University of Stirling)

Abstract

We use a novel field experiment which jointly tests two implicit assumptions of updating models in a joint framework: that new information leads to new knowledge and that new knowledge can affect economic decisions. In the experiment, we elicit subjects’ prior knowledge state about a good’s attributes, exogenously vary how much new information about good attributes we provide to subjects, elicit subjects’ valuation for the good, and elicit posterior knowledge states about the same good attributes. Testing for changes in knowledge jointly with changes in preferences allows us to horserace updating models more completely than previous studies since we observe ex ante and ex post knowledge states. Our results are consistent with a model of incomplete learning, fatigue and either confirmation bias or costly search coupled with unbiased priors.

Suggested Citation

  • Jacob LaRiviere & Mikołaj Czajkowski & Nick Hanley & Katherine Simpson, 2015. "What is the Causal Effect of Knowledge on Preferences?," Working Papers 2015-14, Faculty of Economic Sciences, University of Warsaw.
    • Handle: RePEc:war:wpaper:2015-14
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    File URL: http://www.wne.uw.edu.pl/index.php/download_file/1657/
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    References listed on IDEAS

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    Cited by:

    1. Nick Hanley & Mikolaj Czajkowski, 2017. "Stated Preference Valuation Methods: An Evolving Tool for Understanding Choices and Informing Policy," Discussion Papers in Environment and Development Economics 2017-01, University of St. Andrews, School of Geography and Sustainable Development.
    2. Oleg Sheremet & John R. Healey & Christopher P. Quine & Nick Hanley, 2017. "Public Preferences and Willingness to Pay for Forest Disease Control in the UK," Journal of Agricultural Economics, Wiley Blackwell, vol. 68(3), pages 781-800, September.

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    More about this item

    Keywords

    Learning; Information; Bayesian Updating; Behavioral Economics;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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