Article

Re-examining economic options for import risk assessments

Risk and Sustainable Management Group, University of Queensland, Murray-Darling Program Working Papers 01/2007;
Source: RePEc

ABSTRACT

Hypothetical bias is a persistent problem in stated preference studies. We propose and test a method for reducing hypothetical bias based on the cognitive dissonance literature in social psychology. A central element of this literature is that people prefer not to take inconsistent stands and will change their attitudes and behavior to make them consistent. We find that participants in a stated preference willingness-to-pay study, when told that a nonhypothetical study of similar goods would follow, state significantly lower willingness to pay than participants not so informed. In other words, participants adjust their stated willingness to pay to avoid cognitive dissonance from taking inconsistent stands on their willingness to pay for the good being offered. (09-WP 486)

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    ABSTRACT: Helicoverpa spp. (heliothis) are a major insect pest of cotton, grains and horticulture in the Murray‐ Darling Basin. Climate change is likely to make conditions more favourable for heliothis. This could cause regional comparative advantages in irrigation systems to change as management costs increase and yields decrease. Irrigation in the Murray Darling Basin produces 12 percent of Australia’s total gross value of agricultural production. If producers fail to consider climate change impacts on heliothis they may misallocate resources.Adamson et al. (2007 and 2009) have used a state contingent approach to risk and uncertainty to illustrate how producers could allocate irrigation resources based on climate change impacts on water resources. This is achieved by separating environmental risks and uncertainties into defined states of nature to which the decision makers have a set of defined responses. This approach assumes that the decision makers can achieve optimal allocation of resources as they have perfect knowledge in how they should respond to each state of nature (i.e. producers know how to manage heliothis now). Climate change brings a set of new conditions for which existing state parameters (mean and variance) will alter. Consequently a decision maker will have incomplete information about the state description; and the relationship between state allocable inputs and the associated state dependent output, until they have experienced all possible outcomes. Therefore if producers ignore climate changes to heliothis they may lock in resources that may prove to be unprofitable in the long run. The purpose of this paper is to suggest a framework that could be used for determining climate change impacts of heliothis (i.e. density), illustrate that management costs rise as density increases and how a stochastic function could deal with incomplete knowledge in a state contingent framework.
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    Full-text · Article ·
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: Hypothetical bias is a persistent problem in stated preference studies. We propose and test a method for reducing hypothetical bias based on the cognitive dissonance literature in social psychology. A central element of this literature is that people prefer not to take inconsistent stands and will change their attitudes and behavior to make them consistent. We find that participants in a stated preference willingness-to-pay study, when told that a nonhypothetical study of similar goods would follow, state significantly lower willingness to pay than participants not so informed. In other words, participants adjust their stated willingness to pay to avoid cognitive dissonance from taking inconsistent stands on their willingness to pay for the good being offered. (09-WP 486)
    Full-text · Article · Jan 2009 · SSRN Electronic Journal
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