Are Choice Experiment Treatments of Outcome Uncertainty Sufficient? An Application to Climate Risk Reductions

Authors

Christos Makriyannis, Massachusetts Institute of Technology
Robert J. Johnston, Clark UniversityFollow
Adam W. Whelchel, The Nature Conservancy

Document Type

Article

Abstract

Choice experiments addressing outcome uncertainty (OU) typically reframe continuous probability densities for each risky outcome into two discrete categories, each with a single probability of occurrence. The implications of this simplification for welfare estimation are unknown. This article evaluates the convergent validity of willingness-to-pay (WTP) estimates from a more accurate multiple-outcome treatment of OU, compared to the two-outcome approach. Results for a case study of coastal flood adaptation in Connecticut, United States, suggest that higher-resolution OU treatments increase choice complexity but can provide additional information on risk preferences and WTP. This tradeoff highlights challenges facing the valuation of uncertain outcomes.

Publication Title

Agricultural and Resource Economics Review

Publication Date

12-2018

Volume

47

Issue

3

First Page

419

Last Page

451

ISSN

1068-2805

DOI

10.1017/age.2017.27

Keywords

choice scenario, climate change adaptation, discrete choice experiments, generalized multinomial logit model, outcome uncertainty

Repository Citation

Makriyannis, Christos; Johnston, Robert J.; and Whelchel, Adam W., "Are Choice Experiment Treatments of Outcome Uncertainty Sufficient? An Application to Climate Risk Reductions" (2018). Economics. 159.
https://commons.clarku.edu/faculty_economics/159

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Copyright Conditions

Makriyannis, C., Johnston, R. J., & Whelchel, A. W. (2018). Are choice experiment treatments of outcome uncertainty sufficient? An application to climate risk reductions. Agricultural and Resource Economics Review, 47(3), 419-451.