Modelling outcome-related risk in choice experiments

Abstract

In this study, we introduce information on outcome-related risk as an additional attribute in a choice model of preferences for a land-based climate change mitigation project. We provide a comprehensive comparison of different model specifications arising from different behavioural assumptions about the way that respondents process information on outcome-related risk within the choice task. We find significant differences between several specifications in terms of both model fit and WTP estimates. The behavioural assumptions made when choosing a particular model specification, and reasons that motivate them should be made explicit, and consequences of using different specifications should not be ignored. © 2013 Australian Agricultural and Resource Economics Society Inc. and Wiley Publishing Asia Pty Ltd.