What is the Causal Effect of Information and Learning about a Public Good on Willingness to Pay?

Citation

Czajkowski M, Hanley N, LaRiviere J & Simpson K (2014) What is the Causal Effect of Information and Learning about a Public Good on Willingness to Pay? [SEDP-2014-05]. Stirling Economics Discussion Paper, 2014-05.

Abstract
In this study we elicit agents' prior information set regarding a public good, exogenously give information treatments to survey respondents and subsequently elicit willingness to pay for the good and posterior information sets. The design of this field experiment allows us to perform theoretically motivated hypothesis testing between different updating rules: non-informative updating, Bayesian updating, and incomplete updating. We find causal evidence that agents imperfectly update their information sets. We also field causal evidence that the amount of additional information provided to subjects relative to their pre-existing information levels can affect stated WTP in ways consistent overload from too much learning. This result raises important (though familiar) issues for the use of stated preference methods in policy analysis.

Keywords
Bayesian; Public Goods; Behavioral Economics; Stated Preference

JEL codes

• Q51: Valuation of Environmental Effects
• D83: Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
• D81: Criteria for Decision-Making under Risk and Uncertainty