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

Citation

Czajkowski M, Hanley N & LaRiviere J (2012) The Effects of Experience on Preference Uncertainty: Theory and Empirics for Public and Quasi-Public Goods. Economics Working paper, 2012-17.

Abstract
This paper develops a model of demand estimation in which consumers learn about their true 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 quasi experience with a good will make consumers more certain over their preferences in both mean and variance are supported in each case.‐public goods. We find that the predictions of the theoretical exercise that additional

Keywords
Bayesian, demand estimation, stated preference, generalized multinomial logit, scale, scale variance.

JEL codes

• C51: Model Construction and Estimation
• D83: Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
• Q51: Valuation of Environmental Effects
• H43: Project Evaluation; Social Discount Rate