Do numerical probabilities promote informed stated preference responses under inherent outcome uncertainty? Insight from a coastal adaptation choice experiment

Abstract

Stated preference (SP) valuation provides insight into individuals’ preferences for environmental goods and assigns a monetary value to these preferences. It employs survey questions that elicit information on choices or behaviors in response to hypothetical future scenarios involving changes to these goods. Outcome uncertainty (OU) within SP studies refers to uncertainty concerning whether the effects communicated in these hypothetical scenarios would actually occur, were the scenario to be implemented as indicated in the questionnaire. Inherent OU may be further defined as OU that is invariant across scenarios. For example, the effect of installing coastal flood defenses may depend on a probability of severe storms that is fixed in the study area over the relevant time horizon. Inherent OU has received little attention in the environmental SP literature. For example, it is unknown whether numerical, percentage probabilities—a ubiquitous means of communicating uncertainty in SP questionnaires—are an effective risk communication tool for inherent OU in environmental valuation scenarios. This article evaluates two treatments in a discrete choice experiment survey related to coastal climate change adaptation in Connecticut, USA: one provides only raw frequencies as a risk communication tool, while the other provides implied percentage probabilities in addition to the same raw frequencies. Results show that the use of percentage probabilities to communicate inherent OU has no additional effect on average welfare estimates or the choice behavior of respondents. These findings suggest that percentage probabilities may not provide useful information to SP respondents, beyond that conveyed by past event frequencies.