Scale Perception Bias in the Valuation of Environmental Risks

Jorge E. Arana (1, 2) , Carmelo León (3)

1 Applied Economic Analysis Department
2 ARE - Department of Agricultural and Resource Economics [Berkeley]
3 Applied Economic Analysis

The valuation of environmental risks is commonly approached with the utilization of stated preference methods such as contingent valuation. In these methods, money is utilized as the scale that reflects the individual's underlying utility function. However, this scale can vary across individuals due to different perceptions on what are the right or appropriate bounds for willingness to pay. In this paper we test for scale perception bias and propose a correction method based on the utilization of anchoring vignettes that define different degrees of preference for the non-market good. The proposed method is applied to study he commonly found anomaly "probability neglect", which is defined by the insensitivity to the probability levels in the valuation of environmental risks. The results show that probability neglect is reduced when willingness to pay responses are corrected for self-perception bias through the utilization of the anchoring vignettes approach.

Mots clés: Social Sciences & Humanities

Domaines: Économie et finance quantitative [q-fin]

Jorge E. Arana, Carmelo León. Scale Perception Bias in the Valuation of Environmental Risks. Applied Economics, 2011, pp.1. ⟨10.1080/00036846.2011.566188⟩. ⟨hal-00701866⟩