How cognitive bias and information disclosure affect the willingness of urban residents to pay for green power ?

Abstract

Abstract A resident's willingness to pay(WTP) for the environmental improvement of renewable energy source (RES) is supposed to be highly correlated with the information he or she acquires. This paper provides both theoretical proof and empirical evidence of resident's cognitive bias regarding green power. A large-scale field survey was conducted in Shanghai and more than 3000 respondents were selected to examine their WTP for green energy. Applying double-bounded dichotomous contingent valuation method (DBDC), this paper elicits the urban residents' WTP for green power and identifies the information effect. Given all the other factors, our research shows that accurate information provision on the costs and environmental improvement effects compared to thermal power would reduce the residents' WTP for RES. The emission information of thermal power, however, would insignificantly change the residents' WTP for RES. The result indicates that residents in urban China have cognitive bias regarding the costs and environmental benefits of RES. Blind testing or improper way of information provision are essential aspects to be avoided for the purpose of eliciting real WTP from consumption side.