What is the causal impact of information and knowledge in stated preference studies?

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ContentslistsavailableatScienceDirect

Resource

and

Energy

Economics

j o ur na l h o me pa g e:w w w . e l s e v i e r . c o m / l o c a t e / r e e

What

is

the

causal

impact

of

information

and

knowledge

in

stated

preference

studies?

Katherine

Needham

a,∗

,

Mikołaj

Czajkowski

b

,

Nick

Hanley

a

,

Jacob

LaRiviere

c aInstituteofBiodiversity,AnimalHealth&ComparativeMedicine,UniversityofGlasgow,UnitedKingdom

bDepartmentofEconomicSciences,UniversityofWarsaw,Poland cDepartmentofEconomics,UniversityofTennessee,UnitedStates

a

r

t

i

c

l

e

i

n

f

o

Articlehistory:

Received26July2017

Receivedinrevisedform16August2018 Accepted2September2018

Availableonline6September2018 JELclassification: D83 D81 Q51 Keywords: Learning Information Behavioraleconomics

Decisionmakingunderuncertainty

a

b

s

t

r

a

c

t

Thispaperreportstheresultsofastatedpreferenceexperimentdesignedtotesthow informationaboutagood’sattributesprovidedinasurveyaffectsknowledge,andhow knowledgeaffectspreferencesforthatgood.Anovelexperimentaldesignallowsustoelicit subjects’exanteknowledgelevelsaboutapublicgood’sattributes,exogenouslyvaryhow muchnewobjectiveinformationabouttheseattributesweprovidetosubjects,elicit sub-jects’valuationforthegood,andelicitposteriorknowledgestatesaboutthesameattributes. Wefindevidenceofincompletelearningandfatigue:assubjectsaretoldmoreinformation, theirmarginallearningratesdecrease.Consistentwithpreviouswork,exanteknowledge doesaffectstatedwillingnesstopay.However,wefindnosignificantmarginalimpactof knowledgeonthemeannorthevarianceofwillingnesstopayforchangesinthe environ-mentalgoodconditionalonexanteknowledge.Ourresultsareconsistentwithanumber ofconceptualmodelsofinformationprocessingandpreferences,includingconfirmation bias,costlysearch,andtimingdifferencesinlearningandpreferenceformation.

©2018TheAuthors.PublishedbyElsevierB.V.ThisisanopenaccessarticleundertheCC BY-NC-NDlicense(http://creativecommons.org/licenses/by-nc-nd/4.0/).

1. Introduction

Understandinghowagentsrespondtoinformationwhenchoosingamongstorvaluinggoodsisimportant.Theeconomics literaturehassetoutanumberofalternativesto“traditional”modelsofcostlesslearningandcompleteinformationretention. Forexample,modelsofboundedrationality,costlylearning,fatigue,andcognitiveloadallimplyagentsdonotcompletely absorbnewinformation(CaplinandDean,2015;Caplinetal.,2011;Gabaixetal.,2006;Sims,2003).Thereisatensionin somecasesbetweenneutralinformationprocessing(Gabaixetal.,2006;TverskyandKahneman,1973,1974)anddeviations fromthis(EilandRao,2011;Fernbachetal.,2012;GrossmanandOwens,2012;RabinandSchrag,1999).

Howpeoplerespondtoinformationtakesonaddedimportanceintheuseofstatedpreferencetechniquestoestimate demandforpublicgoods.MitchellandCarson(1989)identifiedinformationprovisionas“amongstthemostimportantand mostproblematicsourcesoferror”incontingentvaluationsurveys.Respondentsareoftenaskedtovaluecomplexand(in manycases)unfamiliargoods,anditisunlikelythatallorindeedmostrespondentswillhavewell-definedpreferencesprior toelicitation(Gregoryetal.,1995;GregoryandSlovic,1997).Preferenceconstructionisaffectedbyhowtherespondent processestheinformationpresentedtothem,whichinformationtheyselectandtheirownpriorknowledgeaboutthegood

∗ Correspondingauthorat:InstituteofBiodiversityAnimalHealthandComparativeMedicine,CollegeofMedical,Veterinary&LifeSciences,Graham KerrBuilding,UniversityofGlasgow,GlasgowG128QQ,UnitedKingdom.

E-mailaddress:Katherine.needham@glasgow.ac.uk(K.Needham). https://doi.org/10.1016/j.reseneeco.2018.09.001

0928-7655/©2018TheAuthors.PublishedbyElsevierB.V.ThisisanopenaccessarticleundertheCCBY-NC-NDlicense(http://creativecommons.org/ licenses/by-nc-nd/4.0/).

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(Payneetal.,2000).Schläpfer(2008)arguesthatitisunlikelyrespondentswillformconsistentpreferencesunlessthesurvey offersreliablecontextualcuesandBatemanetal.(2008)arguethatfailingtoaccommodatelowinformedrespondentswill leadtohighvariancewillingnesstopay(WTP)estimates.

Bestpracticesinstatedpreferencecontingentvaluationsurveysarethatthesurveyinstrumentincludesbackground informationaboutapublicgoodproject.Johnstonetal.(2017)statethat:“statedpreferencequestionnairesshouldclearly presentthebaseline(orstatusquo)condition(s),themechanismofchange,andthechange(s)tobevaluedandshould elicitevidencethatthesepiecesofinformationareunderstood,accepted,andviewedascrediblebyrespondents”.Baseline informationinstatedpreferencestudiesshouldbeneutral,deemedtechnicallycorrectbyexpertsandseenasrelevantby stakeholdersandpilotparticipants.Buthowmuchbaselineinformationis“enough”?Thereisatensionbetweenproviding sufficientinformationneededtoestablish“baselineconditions”andover-loadingrespondentswithsuperfluousdetail.This paperattemptstotesthowadditionalneutralandrelevantinformationimpactsknowledgeaboutthegoodandestimated WTPforachangeinthatgood.Anovelexperimentaldesignisusedtocastlightonwhattheappropriatelevelof“baseline information”isinacontingentvaluationstudy.

Weareinterestedintheinteractionbetweentwoimportantstrandsoftheliterature.First,howmuchasubjectknows aboutagoodbeforeasurveybeginsisoftencorrelatedwiththeirWTP(CameronandEnglin,1997;LoomisandEkstrand, 1998;Tkac,1998):subjectstendtoknowmoreaboutthingstheycareaboutorhaveexperiencewith(Czajkowskietal., 2015a).Second,informationaboutthemanagement,characteristicsandattributesofapublicgoodprovidedduringasurvey hasbeenfoundtobothinfluenceandnotinfluencestatedvaluations(seeMunroandHanley,2001forasummaryofthe earlyliterature).Anaturalquestion,then,ishowrespondents’ex-anteknowledgelevelsaboutanenvironmentalgoodaffect thecausalimpactofknowledgeacquiredaboutthisgoodduringastatedpreferencesurveyonWTP.Specifically,couldthe effectsonstatedWTPofprovidinginformationbedrivenbyheterogeneityintheex-anteinformationsetsofpeopleinthe sample?Putanotherway,arelessinformedsubjectsmorelikelytobeinfluencedby“new”informationaboutthegood? Thisrelatestoanormativequestionforsurveyinstrumentdesign:whatistheappropriatequantityofinformationabouta goodtoprovidetosubjects?1

Thispaperreportstheresultsofanexperimentdesignedtotestforhowprovidinginformationabouttheattributesof anenvironmentalpublicgoodaffectsrespondents’knowledge;andhowthatnewknowledgeaffectsthedistributionof valuationsforthepublicgoodconditioningonasubject’sexanteknowledgelevels.Wedefineinformation,learningand knowledgeasfollows:informationisaspecificfact;learningisbeingabletorecallaspecificfactfromachoiceset(e.g., inamultiplechoicetest);knowledgeisasetoflearnedinformation.Unlikepreviousliterature,thenovelexperimental designallowsustoelicitsubjects’priorknowledgelevelsabouta good’sattributes;exogenouslyvaryhowmuchnew informationaboutthegood’sattributesweprovidetosubjects;elicitsubjects’valuationforthegoodandfinallymeasure posteriorknowledgestatesaboutthesameattributes.Becauseweexperimentallyvaryinformationintheexperimentin additiontotestingforknowledgestatesatthestartofthesurvey,wecanidentifycausalestimatesforthemarginaleffect ofnewinformationprovidedonknowledgeandthemarginaleffectofknowledgeonvaluationforagood,conditioning onasubject’sexantelevelofknowledge.Wearenotawareofpriorworkintheliteraturewhichdoesthis.Ourdesign alsoprovidesanopportunitytocomparedifferentcognitivemodelsoflearningandstatedvaluationadjustmentwhichhas receivedincreasingattentionintheeconomicsliterature.

Therearetwomainresults.First,givingsubjectsmoreinformationcausessignificantlearning,althoughobservedlearning isincomplete.Wealsofindthatassubjectsaretoldmoreinformation,theirmarginallearningratesdecrease.Thisisconsistent withamodelofimperfectlearningandfatigue.Second,newknowledgeaboutagood’sattributesdoesnotsignificantlyaffect valuationsforthatgood.Wedofindsystematiccorrelationsbetweenexantelevelsofinformationandvaluations:exante moreknowledgeablesubjectsvaluedthegoodlessthanexantelessknowledgeablesubjects.However,learningadditional informationdidnotaffectthesevaluationsholdingtheexanteknowledgelevelsfixed.Further,theadditionalinformation didnotaffectthevarianceofthedistributionofvaluations.

Ourpapercontributestotheliteratureinseveralways.First,wecanjointlytestforhowinformationaffectsknowledge andhowknowledgeaffectspreferencesinaunifiedframework.Previously,literature,whichvariesaccesstoinformation aboutenvironmentalgoods,onlyvariesinformationwithoutverifyingthatithasbeenlearned(Bergstrometal.,1989;Boyle, 1989;Hoehnetal.,2010;Smithetal.,1988).Asaresult,wecanestimateaveragetreatmenteffects(ATEs)ratherthanintent totreat(ITT)effects.

Second,wearealsoabletotestforthecausalimpactofinformationandlearning,conditioningonexantelevelsof knowledge.PreviousliteraturehasshownthatdifferentexantelevelsofinformationcansignificantlychangestatedWTP (CameronandEnglin,1997;LoomisandEkstrand,1998;Tkac,1998).Intheclosestexperimentaldesigntoours,Boyle(1989) findsthatinformationaboutmanagementcostsandmanagementpracticescaninfluencethevariancebutnotthemeanof theWTPdistribution.However,Boyle(1989)wasnotabletoidentifyifthiseffectvariesacrossthepopulationbyinformation sets.

1 Arelatedquestionwedonotaddresshereis:conditionalonquantity,whatistherightcompositionofinformationaboutagoodtoprovidesubjects.This paperfocusesonthequantityquestionsurroundinginformationprovision(extensivemargin)onlybutsimilarissuesexistforthecompositionquestions aroundinformationprovision(intensivemargin);seeMunroandHanley(2001)forasummaryofearlyworkonthisissue.

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Third,wefocusspecificallyontheobjectivecharacteristicsofthegoodwhichwecanconfirmwereunknowntothe subject.Otherstudiesofinformationinastatedpreferencecontextfocusondifferentformsofinformationsuchasredundant information(ViscusiandO’Connor,1984),therelativecostofmanagementversusasubject’sincome(Bergstrometal., 1989),andspecificityofmanagementactions(Boyle,1989).Ourpaperestimatesthemarginalimpactofbothinformation andacquiredknowledgeaboutpublicgoodattributesonWTP,conditionalonpriorknowledgelevels.

Inaddition,becauseweareabletotestforexanteandexpostknowledgestates,varylevelsofinformation,identify thatinformationcreatesknowledgeandsubsequentlyestimateWTP,wehavethenecessaryfeaturestolinkthislargeand somewhatolderliteratureoninformationeffectsincontingentvaluationtoanewereconomicsliteratureonupdatingand valuation.Specifically,recentadvanceshighlighthowcognitiveconstraints,costlyeffort,endogenoussearchand confir-matorybiascaninfluencebothlearningandsubsequentvaluation(Aadlandetal.,2007;CaplinandDean,2015;Caplin etal.,2011;DelosSantosetal.,2012;RabinandSchrag,1999).Thisisimportant,asrecentevidencesuggeststherecanbe unexpecteddeparturesfromneoclassicalmodelsofupdatinginstatedpreferencestudies(LaRiviereetal.,2014).

Finally,becausewesimultaneouslytrackboththecausaleffectsofinformationonknowledgeandknowledgeonvaluation, weareabletocompareseveraldifferentmodelsoflearning,informationprocessandpreferenceformationinaunified framework.Toourknowledge,thisisthefirstsuchcomparisoninastatedpreferencesurvey.Togetherwithourresultson learning,ourresultsturnouttobeconsistentwiththreemodelsofpreferenceformation:1)confirmatorybias(Rabinand Schrag,1999),2)heterogeneouspreferencesandendogenouscostlyinformationacquisitiondecisions,similarinspiritto Caplinetal.(2011)andCaplinandDean(2015)and3)atiminglagbetweenlearningandpreferenceformation.

2. Survey,experimentaldesign,andhypotheses

Ourexperimenthasfourkeycomponents.First,thedesignallowsustotestforhowmuchinformationrespondents possessaboutthegoodinquestionattheoutsetoftheexperiment:thatis,tomeasuretheirexanteknowledgeabout thegood’sattributes.Second,thedesignalsoallowsustotesthowmuchofthenewinformationprovidedtorespondents islearned.Third,weareabletoobservehownewknowledgeinducedbyexogenouslyvaryinglevelsofinformationaffect valuationsforthegood.Fourth,wecanusethedesigntotestwhetherourfindingsareconsistentorinconsistentwithseveral differentmodelsoflearningandpreferenceformationrecentlydevelopedintheeconomicsliterature.

2.1. Priorvaluationstudies

Earlystatedpreferenceresearchbegantoquestionhowthequantityandqualityofinformationprovidedinsurveys influencesboththemeanandvarianceoftheWTPestimate.Resultsweremixed:somestudiesshowedthatincreasing infor-mationprovideddidnotaffectmeanWTP,butthevarianceoftheestimatereducedwithincreasinginformation(Boyle,1989; Bergstrometal.,1989).OtherstudiesshowedthatprovidingmorepositiveinformationincreasedmeanWTP(Bergstrom andStoll,1990)butthatthereisalevelofsaturationwherefurthernewinformationnolongeraffectstheestimates(Munro andHanley,2001).

Furtherresearchquestionedtheroleofarespondent’spriorknowledgeonuncertaintyintheWTPestimate(Loomis andEkstrand,1998).Tkac(1998)usedaquiztotesttherespondent’spriorknowledgeonthegoodbeingvaluedandfound thatincreasedpriorknowledgewaspositivelycorrelatedwithWTPalthoughtheserespondentswerelessreceptiveto newinformation.HoehnandRandall(2002)extendedthisworkandfoundthattheeffectofnewinformationwasuneven acrossrespondentswithsomerespondentsrevisingtheirWTPupwardsandsomerevisingitdownwardsinresponsetonew information.

Morerecentworkhasused“quizzes”asameansoftestingrespondent’spriorknowledgeofthegoodinquestionand investigatedhowthisaffectstheirWTPestimateandtheinterpretationoftheinformationprovidedtothemduringthe survey.HasselströmandHåkansson(2014)foundthatWTPdifferedsignificantlybetweenthe“detailed”and“fuzzy” infor-mationsetsforlowknowledgerespondentsbutnotforhighfamiliarityrespondents.Recentworkonthevaluationofcold watercoralsinNorwayalsousedaquiztoexaminerespondent’sknowledgeandfamiliaritywiththegood(LaRiviereetal., 2014).Aneight-questionquizgroupedrespondentsintohighandlowknowledgefollowinganinitialpresentationoncold watercorals.LaRiviereetal.foundthatmoreknowledgeledtorespondentsbeingmoreconsistentintheirchoices,whilst thosewhoscoredabovethemeanwerepreparedtopaysignificantlymoretowardscoldwatercoralprotection.Usingthe samedataset,Sandorfetal.(2017)demonstratedthatrespondentswithmoreknowledgeweremorelikelytoattendtothe attributesinchoiceexperiments.Jonesetal.(2017)showthatdescribingtypesofvaluewhichcanbecreatedfromaproject indifferentways(e.g.,notdescribingversusdescribingthem)canimpactWTPstudies.Resultsindicatedthatbetween78% and94%ofrespondentslearnedsomethingnewandusefulfromthenewinformationprovidedtothem.

Weembeddedourexperimentwithinastatedpreferencesurveyconcerningapopulation’sWTPforaprojecttorestore coastal(estuarine)wetlands asa wayofmitigatingfloodrisk(known asmanagedrealignment).Managedrealignment offersseveralbenefitsovertraditionalhardconcretedefenses.Estuarinewetlandsmakeuseofthestormbufferingcapacity ofintertidalhabitats,aswellasprovidingadditionalfloodplainsduringhightidesandstormsurges(KingandLester,1995). Inaddition,wetlandsalsoprovideamenityvaluebyincreasinghabitatforwildlife,alongwithnumerousotherecosystem servicebenefitssuchaspollutionreductionandactingasanurseryforearly-lifestagesoffishandshellfish(Barbier,2011).

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Whenplanningmanagedrealignmentschemesthereisaneedtoengagewiththegeneralpublicasthereisalegacyoflocal residentsbeingopposedtosuchschemes(Ledouxetal.,2005).

WedesignedacontingentvaluationsurveytovalueasinglespecificmanagedrealignmentschemeontheTayEstuary inScotland.ThesurveywasdesignedfollowingtherecommendationsofCarson(2000)2.Aninitialfocusgroupwasheld torefineboththeinformationandthevaluationportionsofthesurveywithstaffandstudentsattheUniversityofStirling. Thiswasfollowedbyapilotsurveysentto250householdswithinthestudyregion,towhich50householdsresponded.The surveysamplewasrestrictedtoScottishresidentswithinthelocalauthorityareaswhowouldberesponsibleforpayingfor themanagedrealignmentschemeviatheirlocalcounciltax.TheserestrictionswereappliedtotheScottishPhoneDirectory database,whichholdsthenamesandaddressesofthepopulationbasedontheElectoralRegister,and4000householdswere randomlyselectedtotakepartinthefinalsurvey.Duetotheexperimentaldesign,thesurveycouldonlybeundertaken online,usingawebsitewedesignedandoperatedviaSurveyGizmo.Respondentswereinvitedtotakepartthroughtargeted postalmailings.RespondentsreceivedaletteronUniversityofStirlingheadedpaperinvitingthemtotakepartinthesurvey andweregivendetailsofthesurveywebsite.Aremindercardwassenttwoweeksafterthefirstcontactattempt.Subjects whocompletedthesurveyweregivena

£10

($16)Amazongiftcard.Ofthe4000peoplecontacted,749peoplecompleted theonlinesurveywith593usable(fullycompleted)responses:aresponserateof15%.Theresponserateiscomparablewith asimilarUKwidestatedpreferencesurveyforflooddefense(12%)(Josephetal.,2015),aswellasotherUKpostalstated preferencesurveysthathadresponseratesrangingfrom11%to22%(Burtonetal.,2001;Hanleyetal.,2010).

Theorderofthesurveywasasfollows.Subjectsweretoldthattheirresponseswouldhelpinformpolicy-makersimprove themanagementoffloodingintheirlocalarea.Theywerethengivenanine-questionmultiplechoicequizrelatedtoobjective informationaboutflooding,floodprotectionandwetlands.Eachquestionwasdesignedtocorrespondtodifferentattributes oftheproposedproject,suchasthewayinwhichwetlandsbenefitwildlifeandtheproportionofhomesinthestudyarea whicharecurrentlyclassifiedasatriskfromflooding.Wejustifiedthequizasawayofinformingpolicymakershowwellthis topicwasbeingcommunicatedtoandunderstoodbythecommunity.Thequizwasdevelopedwithacademicsspecializing infloodriskmanagementtoensurethequestionsandanswerswereappropriateandaccurate.Respondentswerethengiven eitherthree,sixorninepiecesofadditionalinformationabouttheattributesoftheproposedflooddefensestrategy.Each pieceofinformationprovidedtosubjectscorrespondedtoasinglemultiplechoicequestionfromthequizinaccordance withtherandomizedexperimentdesigndetailedinthenextsubsection.

Theninequestionsreflectthekindsofadditionalinformationcommonlyprovidedinstatedpreferencesurveys.They coverecosystemserviceco-benefitsofthenewmanagedrealignmentscheme,thehistoricalbaseline,andtheenvironmental problem(here,increasingfloodrisks).Providingthistypeofbackgroundinformationisinlinewithbestpractices(Johnston etal.,2017).Eachofthebulletpointsweprovideisrelevantforthecaseweconsider.Forexample,intalkingaboutthe currentbaselinetypeoffloodprotectionweincludeaquestionandbulletpointaboutexistingfloodprotectionmethods. Wedothesameregardingcoastalwetlandsandtheirimpactonwaterbirdpopulations.Indesigningasurveyinstrument thedesignermustmakeacallaboutwhatbackgroundinformationtoincludeandwhatnottoinclude.Thispaperdistils thatbackgroundinformationabouttheproject(e.g.,historicalfloodprotectionandecosystemrelationships)intoninebullet pointsthenrandomlyvariestheamountprovidedtosubjects.

Followingthequiz,themanagedrealignmentscenariowasthendetailed,includingamapofwheretheschemewouldtake place,howmanyhomeswouldbeprotectedandthelengthoftimethenaturalflooddefensewouldtaketobecomeeffective. Astatusquoscenarioofcontinuedrelianceonexistingharddefenseswithnomanagedrealignmentwasalsoincluded.The costoftheprojectwasdescribedasbeingincreasesinrespondent’scounciltaxtofundthescheme;respondentswere toldthatthiscostwascurrentlysubjecttosomeuncertainty,motivatingtheuseofapaymentcard.Counciltaxwasa plausiblepaymentvehicleaslocalauthoritiesareresponsibleforfundingflooddefenseinScotland.WethenelicitedWTP forthemanagedrealignmentschemeusingapaymentcardrangingfrom

£0

to

£150:

respondentswereaskedtotickall theamountswhichthehouseholdwasWTPtowardsthescheme.Thevalueswerechosenbasedonfeedbackfrominitial focusgroups.ImmediatelyfollowingtheWTPelicitation,respondentsrepeatedtheoriginalnine-questionquiz.Aseries ofdebriefingquestionsfollowed,includingquestionsregardingperceivedfloodrisk,aswellasasetofsocio-demographic questions.Notethatwechosenottoaskvaluationsmorethanonceinoursurveybecauseinourviewthatcompromised theexternalvalidityofourresults.Table1showsasummaryofoursurvey’stiming.

Tofosterpolicyconsequentiality,severalremindercuesindicatingthattheresultswouldbesharedwithpolicymakers wereincludedinthesurvey,specifically:

“ThepriceyouchoosewillbeusedtoinformthelocalauthoritiesandtheScottishGovernmentwhendecidingfuture flooddefenseoptionsintheTayEstuary.”

“Rememberthatyourpreferenceswillbeusedinconjunctionwithcostsofthescheme,whentheyareknown,by localauthoritiesandtheScottishGovernmenttoinformwhichflooddefensepolicyischosen”

Wechosetouseapaymentcardformatforthreemainreasons.First,thegovernmentwasonlyconsideringasingle policyofafixeddesign.Asaresult,anyformofdiscretechoiceexperimentwasinappropriatesincewewerenotinterested

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Table1

Surveysummary. 1.Subjectbeginssurvey

2.Ninequestionmultiplechoicequiz

3.Randomlyassignedtreatmentgroup(conditionalonquizscore)

4.Managedrealignmentpolicyoutlined,includingcosts,timescaleandstatusquoscenario 5.Respondentsreceivetheiradditionalthree,sixorninepiecesofinformation

6.ElicitWTPformanagedrealignmentscheme 7.Secondquiz

8.Seriesoffollowupquestionsregardingfloodriskattitudes 9.Socio-demographicquestions

Box1:Elicitationscenariointhecontingentvaluationsurvey.

Wewouldnowlikeyoutothinkaboutthevaluetoyoupersonallyofdevelopingthismanagedrealignmentschemefor

NewburghontheTayEstuary:

•Onthenextpageyouwillbeshownatableofpricesthatwouldbeaddedtoyourcounciltaxannuallytocoverthe

costsandmaintenanceofthescheme.

•Youareaskedtochooseamongstavarietyofpriceoptionsastheprecisecostsofgoingaheadwiththemanaged

realignmentschemeatpresentareunknown.

•ThepriceyouchoosewillbeusedtoinformthelocalauthoritiesandtheScottishGovernmentwhendecidingfuture

flooddefenseoptionsintheTayEstuary.

•Beforeyouanswercarefullyconsiderthecosttoyou.Thinkaboutyourhouseholdbudgetandwhatyouwouldhave

totradeofftopayfortheincreaseincounciltaxe.g.whatyouliketobuyorareductioninyourplannedsavings.The

averagehouseholdcounciltaxbillinScotlandis

£

984peryear.

WhathappensifthereisnoManagedRealignmentScheme?

•Ifthemanagedrealignmentschemedoesnottakeplacetheexistingflooddefenses(seawalls)willcontinuetobe

maintainedbythelocalauthoritiesatnoadditionalcostonyourcounciltaxbill.

•Howevertherewillbenoadditional floodprotectionandadditionalbenefitsofmanagedrealignment willnotbe

realized.

Rememberthatyourpreferenceswillbeusedinconjunctionwithcostsofthescheme,whentheyareknown,bylocal

authoritiesandtheScottishGovernmenttoinformwhichflooddefensepolicyischosen.

inestimatingtherelativevalueofdifferentattributesoftheprojectordifferentecosystemservicevalues.Second,we chosenottouseabinarydichotomouschoice(BDC)formatduetotheinherentnoiseandlackofstatisticalefficiencyina BDCformat,whilstusingaDoubleBoundedformatoftengivesrisetoinconsistenciesbetweentheinitialandsecondbid response(Batemanetal.,2008;Whitehead,2002).Finally,becausetheparameterofinterestforusisthemarginalimpactof randomizedtreatmentrelativetoabaseline(e.g.,nonewinformation)onWTP,wedonotneedtoconcernourselveswith theanchoringproblemsfacedbypaymentcards,sinceanyanchoringeffectswouldbesharedbybothsubjectsreceiving moreinformationandthosereceivinglessinformation.Moreover,asweareinterestedinthetreatmenteffectofinformation provisionandnotintheaggregatebenefitsoftheprojectinthispaper,weviewanchoringbiasasasecondorderproblem. However,werecognizethatpaymentcardsarenotwidelyviewedasincentivecompatible(CarsonandGroves,2007).In particular,thereareconcernsthatpaymentcardscanleadtoparticipantsunder-revealingdemandforthegoodandthatin manycasespaymentcardsdonotfollowanimplementationrule.

However,ourscenarioandthepaymentcardweemployreflecttherecommendationsofVosslerandHolladay(2018) whoconsideredincidenceswherepaymentcardscanbeincentivecompatible.Ourpaymentcardwaspresentedasaseries ofyes/novotesandweaskedsubjectstoanswer“yes”toeachpaymentlevelthatthehouseholdwoulddefinitelybewilling topay.Wehighlightedthattheoverallcostofthewetlandsprojectwasuncertain,explainingwhyarangeofpayments optionswereoffered.TheelicitationscenarioisprovidedinBox1.

Itisusefultoreemphasizethegoaloftheexperimentatthisstage:weareinterestedinthecausalmarginalimpactof alargerquantityofinformationrelatingtoagood’sattributesonstatedWTP.Thereareothertypesofinformation,which areimportant(e.g.,remindersofbudgetconstraints,statementsaboutconsequentiality,etc.).Wefocusnarrowlyonthe quantityofinformationaboutpublicgoodattributes.Aslightlydifferentquestionregardsthecontentofagivenamountof informationorpublicgoodproject,butweleavethatanalysisforfuturework.

2.2. Experimentaldesign

Asstatedabove,atthebeginningofthesurvey,wegavesubjectsanine-questionmultiplechoicequiz.Eachquestion relatedtoasinglepieceofinformationaboutthepublicgoodproject.Afterthefirstmultiplechoicequiz,thenumberof

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Table2

Type-treatmentpairs.

ExAnteInformation

Treatment L M H

H LH MH HH

M LM MM —

L LL — —

Columnsofthetablerepresentthegroupings(L,M,H)bythefirsttestscoreandrowsrepresentalternativetreatments.Tofocusontheeffectofnew informationwenevertreatsubjectswithlessinformationthantheirexanteknowledge.

correctanswers,thespecificquestionsansweredcorrectlyandthespecificquestionsansweredincorrectlywererecorded foreachsubject.Wethengroupedrespondentsintoaprioriknowledgetypesasafunctionofthenumberofcorrectanswers: low(L),medium(M)andhigh(H).AprioritypeLcorrespondsto1–3correctanswers,typeMcorrespondsto4–6correct answersandtypeHcorrespondsto7–9correctanswers.

Aftersubjectscompletedtheinitialquizandtheiranswerswererecorded,werandomlyassignedeachsubjecttoa treatment.Atreatmentinourcasewasanamountofinformationabouttheattributesofthegood.Treatmentscouldbe low(L),medium(M)orhigh(H).Eachtreatmentcorrespondstoanumber(3,6or9forL,MorHrespectively)ofbullet pointsand/orfiguresconveyingpreciseandobjectiveinformationabouttheissue(flooding)orgood(newcoastalwetlands). Eachbulletpointand/orfigurecorrespondsexactlytoonequestionaskedonthemultiplechoicequestionnaire.Asaresult, aftertreatmentassignment,eachagentcanbesummarizedasatype/treatmentpairinadditiontoinformationabouttheir correctandincorrectanswers.Forexample,atypetreatmentpaircouldbeMH:asubjectwhoanswersbetweenfourand sixquestionscorrectlyandwhoisthengivenallninebulletpointsofinformation.

Importantly,respondentswerealwaysgiveninformationtheyansweredcorrectlybeforeanyadditionalinformationwas givenasdictatedbytreatment.Forexample,assumerespondentAgetsquestions2and7correctandthattheyareinthe Ltreatment.RespondentAistypeLsincetheyonlygottwooutof9questionscorrect.Theinformationsetthattheywould thenbeprovidedwithconsistedoftwobulletpointsassociatedwithquestions2and7and,additionally,oneinformation bulletpointselectedatrandomfromtheremaining7.Alternatively,assumerespondentBgetsquestions7,8,and9correct andtheyareintheMtreatment.TheyaretypeLsincetheyscoredthreeoutofnine.Theirbulletpointswouldbethethree bulletpointsassociatedwithquestions7,8and9andthreerandomlychosenbulletpointswhichcorrespondtoquestions 1through6.Atnopointwasasubjecttoldthenumberofquestionswhichtheyansweredcorrectly,thattheycorrectly answeredanyparticularquestion,northattheinformationtheyweregivenrelatedtoquizmaterial.Inthisrespect,theonly differencebetweenastandardstatedpreferencesurveyandoursurveybeforeelicitingWTPwasashortmultiplechoice quizatthebeginning.

Thereasonfornotrandomlyselectinginformationisthatweareconcernedwiththemarginaleffectofnewinformation onlearningandpreferenceformation.Inorderfortheexperimentaldesigntobevalid,wemustmakesurethat,onaverage,a type-treatmentpairofLListhepropercounterfactualfortype-treatmentpairLM.Iftheinformationtreatmentdoesnotspan theagent’saprioriinformationset(e.g.,anindividual’stype),thenthepropercounterfactualcannotbeensured.Specifically, imaginethesituationaboveinwhichrespondentAgetsquestions2and7correctbuttheirLtreatmentarebulletpoints associatedwithquestions3,4and5.Inthatcase,respondentAcouldtestasatypeMexpostwhentheirinformationsetis elicitedlaterintheprotocol.

Thetype-treatmentpairsandtreatmentinformationsetsaresummarizedinTable2.Columnsrepresentthetypes(L,M, H)definedbytheaprioritestscore,androwsrepresentthegroupsbasedupontreatment.Thereareuptoninepotential type-treatmentpairssomeofthesepairsmaybeuninformative.Forexample,ifsomeonehasahighinformationlevelexante(type H)thentheywilllearnnonewinformationwhengiventhelowtreatment.Alternatively,ifsomeonehasalowinformation levelexante(typeL)thentheycouldlearnnewinformationwhengiventhehightreatmentandsubsequentlyhaveany expostinformationlevel(L,M,orH).We,therefore,restrictexanteHinformationtypestoreceiveonlyHinformation treatmentsandexanteMinformationtypestoreceiveonlyMandHtreatmentstomaximizethepoweroftheexperiment andfocusontheeffectofadditionalinformation.

Afterthequizandtheinformationtreatmentsasstatedabove,subjectswereallgivenidenticalbackgroundinformation aboutthefloodingissueandcoastalwetlandcreationproject,thelocationofthefloodplainandprospectivenewwetland, thepossiblefloodmitigationbenefitsandthepotentialcostofthepolicy.Atthispoint,allagentswereaskedtoselecttheir maximumWTPforthegood.Finally,eachagentwasgiventheexactsamequizasatthebeginningofthesurvey.Thus,atthe endofthesurveyeachrespondentinatreatedgroupissummarizedbyaninitialsetofquizanswers(aprioriinformation set),atype-treatmentpair,atreatmentinformationset(bulletpoints),aWTPresponse,andasecondsetofquizanswers (expostinformationset).

Animportantcontributionofourpaperisthattheexperimentaldesignprovidesuswiththeopportunitytoverifythat informationisactuallylearned.Onecostofthisdesign,though,isthatwemustgivesubjectsaquizbeforeelicitingWTP. Takingaquizisadmittedlyuncommonforsubjectsbeforevaluingagood.Thisexternalvalidityconcern,though,isthecost ofcleanlyverifyingthatinformationprovidedwasindeedlearned.Furthermore,theexternalvalidityconcernisonlyvalid

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iftakingapre-surveyquizfundamentallyalterstheroleofinformationandknowledgeinasurvey.Weviewthisaspossible butunlikely.

Fromanexperimentaldesignperspective,wechosenottoincentivizelearningbypayingsubjectsforansweringcorrectly, inordertomimiccommonpracticeinstatedpreference studiesascloselyaspossible.Thisdecision providesexternal validitywithinthestatedpreferenceliteraturewherebestpracticessaynothingaboutincentivizinglearning,norhow incentivizinglearningmightimpactstatedWTP(Johnstonetal.,2017).Wearenotconcernedwithexperimenterdemand effectsbecause(savethepre-surveyquizdiscussedabove)thesurveymimicsbestpracticesforapaymentcardsurvey. Finally,intheeconometricanalysis,weintentionallyweighteachquestionequallyinordertoaligntheempiricaldesign withtheresearchquestionofidentifyinghowthequantityofinformationinthesurveyimpactsWTPmeasures,conditional onexanteknowledgelevels.Weareinterestedinlearningaboutbothhowpeopleusetheamountoflearnedknowledge instatedpreferencesurveysandinhoweconomistscanimproveonsurveydesign.Giventhatcommonpracticeistogive surveysubjectsawidevarietyofinformationabouttheattributesofthegoodbeingvalued,equalweightingprovidesthe appropriatecounterfactual.

2.3. Hypotheses

Combiningtheinitialquiz,theinformationtreatmentsandsecondquizallowsustotestforhowsubjectslearnand whatinformationprocessingproceduretheyareusinginformingtheirvaluationofagood.Thissubsectionshowshowour designallowsustocomparedifferentmodelsofpreferenceformationinstatedpreferencesurveys.AppendixAprovidesa moredetaileddiscussionabouthowthehypothesesfitintotheliteratureonbehavioraleconomicsasdiscussedinthefirst paragraphoftheintroduction.

Toidentifyhowknowledgeiscreated,itseffectonpreferences,andtoparsebetweendifferentmodelsofpreference formation,weestimatethefollowingtwoequationsseparatelydefining treatmentcoefficientstoconveythemarginal impactoftreatmentoneachoutcomeofinterest:

Q2Scorei=X i+1

LLi,LMi,LHi

LL+1

LMi,LHi

LM+1

LHi

LH+1

MMi,MHi

MM +1

MHi

MH+1

HHi

HH+εi (1) WTPi=X i+1

LLi,LMi,LHi

ωLL+1

LMi,LHi

ωLM+1

LHi

ωLH+1

MMi,MHi

ωMM+ 1

MHi

ωMH+1

HHi

ωHH+εi (2)

Eqs.(1)and(2)includeavectorXofself-reportedsubjectspecificdemographiccharacteristics.3InEqs.(1)and(2),as before,thecapitalletterpairs(e.g.LH)standfortheexantescoreandtheinformationtreatmentrespectively(e.g.,the treatmentsinTable2).Therearetwoleft-handsidevariableswhichweconsiderseparatelybutinbothcases,weleverage experimentalvariationintreatmentanduseasimpleOLSeconometricmodel.Duetoclean,experimentalvariation,OLSis sufficienttodescribethecausaleffectoftreatmentonouroutcomesofinterest,althoughwecorroborateourresultsusing parametricestimationofWTPdistributions.

ThefirstLHSvariableconsideredisQ2score;itisthescorerespondentsachieveinthesecondquiztheycomplete,and thusmeasuresexpostknowledgeofthegood.TheQ2scorespecificationmeasuresactuallearningthatoccursconditionalon exanteinformationlevelsandtreatment.EachcoefficientJNmeasuresthemarginaleffectofbeingtreatedwithadditional

informationonsecondquizscoresforsubjectswhoareinexanteinformationknowledgegroupJwhenbeingintheN informationtreatment.Forexample,LHisthemarginaleffectonsecondquizscoresofbeingpresentedwiththreeadditional

informationbulletpointsrelativetobeingpresentedwiththeMinformationtreatmentbutbeingintheLexanteknowledge group.Thisprovidestherightapplestoapplescomparisonacrosstreatments.

ThesecondequationisdefinedsimilarlywithstatedWTP(WTP)4conditionalonexanteinformationlevelsandtreatment. Forexample,ωLHisthemarginalimpactofbeingsuppliedwiththreeadditionalobjectiveinformationpointsonasubject’s

statedvaluationrelativetoreceivingtheMinformationtreatment(e.g.,nineversussixtotalbulletpoints).

WeestimatebothregressionsbyOLSwithrobuststandarderrors.Wealsoestimatedtheequationsusinginterval regres-sionsandfittedbothanormalandspikedistributiontotheWTPdatatoestimateboththemeanandvarianceoftreatment’s impactonWTP.SinceresultsareconsistentacrossthesespecificationswefocushereontheOLSestimates,asourprimary

3Inthefirstspecificationcontrolsacttoverifythatassignmentisrandom.Putanotherway,theaverageeffectofadditionalinformationonscores(e.g., thevarioustreatmenteffects)shouldnotbeaffectedbydemographiccontrolvariables.Conversely,whenestimatingtheeffectofWTPonthecontrols, itcouldbethecasethattheeffectofadditionalinformationonWTPcouldvarysystematicallywithdemographiccharacteristics.Ifthosedemographic characteristicsarealsocorrelatedwithpreferencesforthegood,thenaddingincontrolscouldaffecttheestimatedcoefficientsoftreatmentonWTP.

4Inwhatfollows,weadoptasimple,non-parametricapproachtoestimatingrespondents’WTP.WeconservativelyassumethattheirWTPisequalto thelowerboundoftheselectedpaymentcardinterval(i.e.,weuseKaplan-MeierestimatorofWTP).Neitherusingmid-pointsoftheselectedintervals,nor adoptingparametricapproachtoestimatingsample-levelWTP(presentedtowardstheendofthepaper)qualitativelychangestheresults.

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interestisthemarginalimpactofinformationonknowledgeandofknowledgeonWTP,ratherthanonWTPlevelsperse. OLSisthesimplestmethodtoconstructthisconditionaldifferentofmeans.

Forallofouranalysis,thecorrectcontrolgroupforanytreatedgrouptoidentifythecausalimpactofinformationon preferencesconditionalonaparticularexanteinformationmustbesubjectswiththesamelevelofexanteinformation. Forexample,thepropercontrolgroupforasubjectintheLHtreatmentisasubjectintheLLtreatment.Bothsubjectstest intoaspecificamountofexanteknowledge(e.g.,L)butarerandomlyassignedinformationtreatmentsHversusL(e.g.,nine piecesofinformationversusthree).Asaresult,LHtypesareidenticaltoLLtypesineverywaywithrespecttotheamount ofexanteknowledgeasitrelatestothequizexceptforLHtypesbeingexposedtosix“unknown”piecesofinformation. ThesamelogicholdsfortypesLMversusLL.ComparingLMtoLHcomparessixversusthreeunknownpiecesofinformation conditionalonexanteLinformationlevels.ComparingMHtoMMcomparesthreenewpiecesofinformationconditionalon Mexanteinformationlevels.5Asaresult,thecorrectcounterfactualforanycomparisonaresubjectswiththesamelevelof exanteinformationbutdifferentinformationtreatments.Tothisend,comparingexanteLtypestoexanteMtypesisnot themaincomparativestaticofinterestsincethosesubjectshavedifferentlevelsofexanteinformation(e.g.,theaverage numberofcorrectanswersinLversusMistwoversusfive).

ByjointlyanalyzingthecoefficientestimatesofEqs.(1)and(2)wecanevaluatewhethertheresultsofourexperimentis consistentornotwithdifferentmodelsoflearningandpreferenceformation.Forexample,estimatingLM=LH=0,MH=0

jointlywithωLM=0,ωLH=0,ωMH=0impliesthatwefailtorejectthenullhypothesesthatnolearningandnopreference

updatingtakesplace.Alternatively,estimatingLL+LM=MM,LL+LM+LH=MM+MH=HHandωLL+ωLM+ωLH

=ωMM+ωMH=ωHH,ωLL+ωLM=ωMMmeansthatwefailtorejectanullhypothesisofcompletelearningandvaluation

updatingfullydependentonattributeinformation.SeeAppendixBforamappingofcoefficientestimatestoalternative modelsoflearning.

3. Results

Table3showsthedistributionofType–Treatmentpairsinoursample.Twelvesubjectsscored7,8or9onthefirstquiz. Asaresult,thereareonlytwelveaprioritypeHsubjectsmeaningthereareonlytwelvesubjectsintheHHtreatment.We oversampledfromtheLLtype-treatmentgroupinordertobalancethepowerinestimatingtreatmenteffectrelativetothe informationtreatmentsmostcommonlyfoundinthefield(e.g.,typeLexante).

Table3alsoreportssocio-demographiccharacteristicsbytreatmenttype.Comparingthecharacteristicsofthelocal authoritypopulationstooursamplerevealedoursamplewasnotfullyrepresentative.Theagegroups40–49years,50–59 yearsand65andoverwerewell-representedinthesurveywhilsttheyoungestagegroup(18–29)wasunderrepresented(9% ofthesamplecomparedto22%inpopulation).Maleswerealsooverrepresentedinthesurvey(58%comparedto47%).63% ofrespondentsworkedfulltimecomparedto50%oftheoverallpopulation.Themodalincomegroupwas

£20,000–£39,000

whichwassimilartothemedianincomeofthelocalauthorities(£26,000).Over80%ofthesampleownedtheirownhomes comparedtolocalauthorityaverageof64%.ThiswouldhaveimplicationsforcalculatingtheaggregateWTPforthemanaged realignmentschemeandappropriateweightingswouldneedtobeapplied.

3.1. Treatmentandlearning

Comparingthefirstandsecondquizscoresitisclearthatsubjectsscoredsignificantlybetteronthesecondquizcompared tothefirstquiz(meanscoreforquizone=3.05,S.E=0.08andmeanscoreforquiztwo=4.86,S.E=0.10)(Fig.1).Thisisevidence thatrespondentswerelessinformedaboutthegoodandtheprojectbeforethesurveyrelativetoafter.

Fig.2comparestotalcorrect,incorrectand“Idon’tknow”responsesacrossthefirstandsecondquizzes.Thereislittle dif-ferencebetweentheincorrectresponsesbetweenthetwoquizrounds,however,theproportionof“Idon’tknow”responses fallssignificantlybetweenthetworounds.ThissuggeststhatpeoplewhowereunsureinRound1werethosewhoread thenewinformationmorecarefullyandlearnedthisnewinformation.Thosewhoguessedincorrectlybutwerenottold theyhadguessedincorrectlyperhapsdidnotengagewiththenewinformationprovided.Fortheremainderoftheanalysis “Idon’tknowresponses”weretreatedas“incorrectresponses”,however,weareinterestedintheinformationlearnedby respondentsasjudgedbytheincreasedquizscore,notthedifferencebetweenincorrectandIdon’tknowrespondents.

Table4showsthecoefficientestimatesofregression(1)withSecondQuizScoreasthedependentvariableandinformation treatmentgroupsasindependentvariables.LL,MMandHHaredefinedasmeanquiz2scoresandLM,LH,andMHdefinedas themarginalimpactofadditionalinformationonthesecondquizscore.Tohighlighttreatmenteffects,weexcludeaconstant inthisregressionspecification.6Wereportfourspecifications:thefullsamplewithandwithoutself-reporteddemographic controlsincludingsurveyround,education,gender,floodthreatindicators,propertyowner,andenvironmentalistandonly

5 ThedesignpermitssomeexanteheterogeneitywithinType-Treatmentpairs.ForexampleasubjectinLLcouldviewzero,one,twoorthreenewpieces ofinformation.Onaverage,though,subjectsintheLMgroupwillseemore.Weshowthisexplicitlybelow.Averagedifferencespreserveinternallyvalid experimentaldesign.Havingtreatmentgroupsdefinedasthenumberofcorrectanswerswasnotfeasiblegivenoursamplesize.

6 Asbefore,someobservationsaredroppedwhencontrolvariablesareincludedsincesomesubjectschosetonotrespondtoquestionsaboutwherethey livedandtheirlevelofeducation.

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Table3

Socio-demographiccomparisonsbetweenthetype-treatmentpairs. Type-TreatmentPairs

LL LM LH MM MH HH Income Under£15,000 18% 16% 2% 16% 11% 22% £15,000–£19,999 13% 13% 13% 12% 14% 0% £20,000–£39,999 24% 23% 38% 41% 41% 33% £40,000–£69,999 27% 26% 33% 20% 20% 33% £70,000–£99,999 10% 11% 7% 9% 9% 11% Over£100,000 8% 10% 7% 2% 5% 0% Education Secondaryschool 24% 23% 15% 20% 19% 22% Sixthform/college 24% 18% 26% 26% 25% 11% Undergraduatedegree 22% 29% 34% 28% 29% 11% Post-graduatedegree 29% 30% 26% 26% 27% 56% Economicactivity Employed 58% 70% 73% 59% 69% 40% Unemployed 42% 30% 27% 41% 31% 60% Propertystatus Propertyowner 76% 79% 84% 89% 87% 90% Other 24% 21% 16% 11% 13% 10% Gender Female 46% 34% 35% 43% 42% 60% Male 54% 66% 65% 57% 58% 40% Age 18–29 8% 11% 16% 6% 11% 10% 30–39 17% 18% 24% 9% 11% 0% 40–49 16% 18% 23% 22% 19% 10% 50–59 26% 24% 16% 25% 26% 30% 60–64 8% 9% 10% 13% 8% 10% 65andover 26% 20% 11% 25% 25% 40% Observations 151 78 72 97 94 12

Note:Socio-demographicinformationbytreatmentstatus.NotallsubjectsineachType-Treatmentpairansweredallsocio-demographicquestions.We investigatethisindetailbelow.

Fig.1.Comparisonofthefirstandsecondquizscores.

individualswhoself-reportedperceivingtheirresponsesasbeingconsequentialtothelikelihoodofthemanagedrealignment schemetakingplace,againwithandwithoutcontrols.Ineachspecification,thecontrolvariablesdonotsignificantlyalter theestimatedtreatmenteffects.Wetakethisasevidencethatweproperlyrandomizedtreatment.7

Table4hastwokeyfeatures.First,foreveryspecification,providingmoreinformationtosubjectsincreasesretained information(knowledge).Someoftheseincreases,though,arenotstatisticallysignificant.Second,therateof

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Fig.2.Comparisonofcorrect,incorrectandIdon’tknowresponsesforquizrounds1and2.

Table4

Regressionofthesecondquizscoreontype-treatmentpairs.

Variables (1) (2) (3) (4) LL 3.53*** 4.07*** 3.43*** 5.15*** (0.06) (0.46) (0.10) (0.56) LM 0.95* 1.30*** 1.10* 1.32** (0.44) (0.13) (0.48) (0.29) LH 0.44 0.56 0.038 0.26 (0.32) (0.28) (0.475) (0.39) MM 5.40*** 6.06*** 5.13*** 6.72*** (0.15) (0.51) (0.24) (0.77) MH 0.88*** 0.91*** 1.00*** 1.08*** (0.13) (0.12) (0.157) (0.18) HH 8.17*** 8.62*** 8.14*** 9.42*** (0.21) (0.11) (0.25) (0.28) Observations 504 431 247 179 Controls N Y N Y

ConsequentialSampleOnly N N Y Y

R-squared 0.87 0.89 0.88 0.92

Robuststandarderrorsinparentheses.***,**,*representsignificanceat1%,5%,10%level,respectively.DependentVariableissecondquizscore.LM,LHand MHaredefinedasthemarginaleffectofadditionalinformation.Controlvariablesincolumns(2)and(4)aresurveyround,education,gender,floodthreat indicators,propertyowner,andenvironmentalist.Columns(3)and(4)includeonlyindividualswhodidnotperceiveresultsasbeinginconsequential.To highlighttreatmenteffects,weexcludeaconstantinthisregressionspecification.

tionretentionvariessomewhatacrossspecifications.However,thepatternofdecreasingretentionasmoreinformationis provided(e.g.,LHcoefficientsmallerthanLMcoefficient)isconsistentacrossspecifications.

Turningtothehypothesistestsforlearning,wecanrejectthehypothesisthatnolearningoccurs.Ineachspecification,the estimatedcoefficientsonLMandMHaresignificantlydifferentfromzero.Similarly,wecanrejectthenullhypothesisthat subjectsexhibitcompleteretention:thecoefficientonLHisnotstatisticallydifferentfromzero.Further,thepointestimates forthecoefficientonLMandMHindicatethatsubjectsretainbetween1and1.3piecesofinformationforeachthreenew piecesofinformationgivenfor“lowlevels”ofnewinformation(e.g.,threenewpieces)butonly0.04to0.56piecesoutof threefor“highlevels”ofnewinformation.

Asaresult,wefailtorejectthenullhypothesisofincompletelearningandfatigue.Themarginalabilityofsubjectsto learnnewinformationisclearlydecreasinginthevolumeofnewinformationprovidedineveryspecification.Itisalsoclear fromthecoefficientsonLL,LMandLHthatinformationmonotonicallyincreasesscores(similarlyforMMandMH).Wetake thisasevidencethatourinformationtreatmentscausesubjectstolearn,butthatlearningisincomplete.

3.2. Willingnesstopayeffect

Table5showssummarystatisticsforWTPlevelsbytreatmentstatus.83%ofthesamplewerewillingtopaytowards themanagedrealignmentschemewithasamplemeanWTPof

£44.77

perannum(S.D=46.21).Themainreasonsfornot beingpreparedtopaywerenotbeingabletoaffordtocontribute(26%)andbeliefthatitistheScottishGovernment’s responsibilitytofundflooddefense(27%).Otherpotentialreasonsfornotbeingwillingtopaywerei)respondentsnot believingthatmanagedrealignmentisaneffectiveflooddefenseii)respondentsnotbelievingthereisaneedtoinvestin flooddefensesandiii)respondentspreferringtospendtheirincomeonotherthings

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Table5

ComparisonofWTPacrossthetype-treatmentpairs.

Type-TreatmentPairs PercentofZeroBids MedianWTP MeanWTP StandardDeviation Observations

LL 19% 20 45.17 48.12 151 LM 14% 45 51.47 48.51 78 LH 19% 20 42.01 46.52 72 MM 19% 20 37.99 39.67 97 MH 13% 30 47.66 48.51 94 HH 0% 45 45.00 34.18 12 Total 17% 30 44.77 46.21 504

Note:Includesallcompletedsurveys.

Table6

RegressionofWTP(mid-pointsofselectedintervalranges)ontype-treatmentpairs.

Type-TreatmentPairs (1) (2) (3) (4)

LL 45.17*** 67.82*** 58.33*** 64.17*** (4.77) (3.75) (4.79) (6.776) LM 6.31 −3.37 0.17 −9.24 (6.04) (6.99) (8.53) (8.72) LH −9.46** −10.55*** −2.72 −5.92 (2.26) (2.14) (8.17) (8.49) MM 37.99*** 57.22*** 36.89** 37.08*** (7.17) (3.24) (10.63) (5.84) MH 9.67 7.59 13.21 7.81 (8.14) (5.05) (14.53) (11.35) HH 45.00** 59.65* 37.14* 24.03 (12.51) (21.69) (16.17) (13.82) Observations 504 431 247 179 Controls N Y N Y

ConsequentialSampleOnly N N Y Y

R-squared 0.49 0.627 0.547 0.72

Robuststandarderrorsinparentheses.***,**,*representsignificanceat1%,5%,10%level,respectively.DependentVariableisstatedvaluation.LM,LHand MHaredefinedasthemarginaleffectofadditionalinformation.Controlvariablesincolumns(2)and(4)aresurveyround,education,gender,floodthreat indicators,propertyowner,andenvironmentalist.Columns(3)and(4)includeonlyindividualswhodidnotperceiveresultsasbeinginconsequential.

Table6showsthecoefficientestimatesofregression(2)withWTPasthedependentvariableandtreatmentgroupas independentvariables.Wereportfourspecifications:thefullsamplewithandwithoutcontrolsandthesubsetofsubjects self-reportingtheirresponsesasbeingconsequentialwithandwithoutcontrols.Inallcases,demographiccontrolshave theexpectedsign.Forexample,environmentalgroupmembersandrespondentswhoweremostconcernedaboutflooding werewillingtopaymoreforthemanagedrealignmentscheme.Includingthedemographiccontrolsdoesnotsignificantly altertheeffectsofthetreatmentgroupsonWTP.Wehenceforthleaveoutanydiscussionofdemographiccontrolstofocus attentionontreatmenteffects.

TherearethreeaspectsofTable6.First,therearesomedifferencesinstatedvaluationsaccordingtowhethersubjectssaid thattheybelievedthesurveywouldbeusedforpolicydecisionsornot(thatis,whethertheybelievedtheirresponseswould beoutcome-consequential).Insomecases,thereareleveldifferences(e.g.,theMMandLHcoefficientsinspecifications(2) and(4)).Inmostcasesthestandarderrorsincreaseaswell(e.g.,LLstandarderrorin(2)versus(4)).Consistentwithprevious fieldstudiesonconsequentialitywefindevidencethatbeliefsaboutconsequentialityarepositivelycorrelatedwithstated WTP(Herrigesetal.,2010;Hwangetal.,2014;InterisandPetrolia,2014;Vossleretal.,2012;VosslerandWatson,2013; Czajkowskietal.,2017).

Second,themeanWTPvariesbyex-antelevelsofinformation.Forexample,peopleintheLLgrouphadsignificantly highervaluationsthanthoseintheMMgroup(p-valueforsignificantdifferenceinspecification4lessthan0.01).Similarly, werejectthenullhypothesisthatωLL+ωLM=ωMMat5%and10%levelsforspecifications(3)and(4).Wefailtorejectthe

highinformationanalogthough(e.g.,failtorejectH0:ωLL+ωLM+ωLH=ωMM+ωMH=ωHH.Whilewefailtorejectthefull

informationhypothesis,thisispossiblyduetoimpreciseestimates.Thisresultisconsistentwiththeliteraturethatexante informationandexperiencelevelswithagoodarecorrelatedwithWTP(CameronandEnglin,1997;LoomisandEkstrand, 1998;Tkac,1998).

Third,themarginaleffectsofinformationonstatedWTP,whichweconfirmedbecomesknowledgeatimperfectbut statisticallysignificantpositiveratesisnotstatisticallydifferentfromzeroineveryspecification.Theoneexceptionisthat thereisasignificantandnegativemarginaleffectofthethreepiecesofinformationintheLHtreatmentwhichweverify abovewerenotlearnedforspecifications(1)and(2).Thisresultimplieslargeamountsofunlearnedinformationleadtolower

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Fig.3.A:Newinformationlearnedversusnewinformationshowni.e.opportunitytolearn.Theaveragenumberofnewbulletsshowis3.11,theaverage numberlearnedis1.38.n=482.B:Newinformationlearnedandmaximumwillingnesstopay.Meanretentionratebytreatment:LL=0.51,LM=0.55, LH=0.50,MM=0.54,MH=0.54,HH=0.63.n=482.

statedWTP.Itcouldbethatsubjectstaketheadditionalinformationasevidencetheyarenotinformedandthatuncertainty abouttheaccuracyoftheirinformationsetaffectsvaluations,similartoLaRiviereetal.(2014)8.

3.3. Learningandwillingnesstopay

Lastly,ourexperimentaldesigngivesustheabilitytotestforthecausaleffectoflearningonWTPdirectly.Wearenot awareofanotherstudywhichhasthisfeature.Becauseweobservewhatasubjectknewbeforethetreatment,exogenously provideinformation,elicitWTPandthenobservewhatthesubjectknewexpost,wecanbothobservelearningandthen relateobservedlearningtoobserveddifferencesinstatedWTP.Thenormalconfoundingfactorinthisanalysisisthatsubjects whoknewlesstobeginwithhaveagreateropportunitytolearn.However,wecancontrolforthenumberofnewpiecesof informationeachsubjectsees.Duetoourexperimentaldesign,then,wecangetaroundthisproblem.

Fig.3showsthecorrelationbetweenexposuretonewinformationandlearningnewinformationandthecorrelation betweenlearningnewinformationandWTPinpanels(a)and(b)respectively.WedefineavariablecalledNewInformation Shownwhichisdefinedasthenumberofnewpiecesofobjectiveinformationshowntoasubject.Forexample,ifasubject answeredfourquestionscorrectlyonthefirstquizandwasassignedtotheMinformationtreatment,theywouldbeexposed totwonewpiecesofinformation.WealsodefineavariablecalledNewInformationLearnedwhichisdefinedasthenumber ofnewpiecesofinformationwhichthesubjectlearned.Putanotherway,NewInformationLearnedisthenumberofcorrectly answeredquestionsonthesecondquizwhichthesubjectbothdidn’tcorrectlyansweronthefirstquizandwhichwas subsequentlyprovidedinaninformationbullet.Thisletsusbecertainthatonaveragesubjectslearnedthebulletpointdue totheinformationpresentedasopposedtoguessingthecorrectansweronthesecondquizrandomly.Hence,InfoBullets LearnedislessthanorequaltoNewInformationShownbydefinition.Lastly,theratioofNewInformationLearnedtoNew InformationShownwecallthe“retentionratio”.

Panel(a)confirmsthefindingsregardinglearningandupdating:despiteacoupleofsubjectswhoareoutliersthereis aclearpositiverelationshipbetweenbeingtreatedwithnewinformationandlearning.Therelationship,though,between WTPandlearningislessclear.Ifanything,itappearsthereisanegativerelationshipbetweenlearningandWTP.However,

8 Wenote,though,that,ourstudyonthecoefficientestimateonLHconcernsthemarginaleffectofknowledgeonpreferences,notthestrengthof preferenceorthevaluationsassociatedwiththem.Tothatend,thecoefficientonLHestimatesthemarginalimpactofadditionalinformationonstated valuation.IssuesraisedbylackofconsequentialityaredifferencedoutbytheLLcoefficientinourstudy.

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panel(b)doesnotcontrolforexanteinformationlevels:forexample,thesubjectswholearnmoreinformationcouldmore likelytohavelessexanteinformationaswell.Ouranalysiscontrolsforthisartefactbreakingthemarginaleffectoflearned informationintoexantelevelofinformationbins.

3.4. Parametricestimationofwillingnesstopay

Whilethereisnoevidenceinourexperimentthattreatmentaffectedmeanvaluations,itispossiblethattreatmentcould haveaffectedthevarianceofthedistributionofvaluations.Czajkowskietal.(2015a,b)showthatinbothBayesianand non-Bayesianmodelsofupdating,additionalknowledgeaboutagoodcanaffectthevarianceinadditiontothemeanof WTPdistribution.IneitheraBayesianornon-Bayesianmodel,moreinformationservestomoveagentsclosertotheirfully informedvaluations,eventhoughissomemodelslikecostlyattentionorconfirmatorybias,agentsarelesslikelychange thesevaluations.

WeperformajointtestoftreatmentonthevarianceandmeanoftheWTPdistribution.9ConsistentwithourOLSfindings, wedonotfindaneffectofadditionalinformationonmeanWTPandthereisnoimpactofadditionalinformationonthe varianceofWTP.Thisresultissomewhatsurprising:eventhoughadditionalinformationdoesnotimpactmeanWTP,a modelofBayesianupdatingsuggeststhatadditionalinformationshouldtightenthedistributionaroundan(unchanging) mean(Czajkowskietal.,2015a,b).EveniftypeLorMsubjectsupdatearoundanunbiased(albeitimperfectlyinformed) meanWTP,thisfindingisinconsistentwithamodelofheterogeneouspreferenceswithBayesianupdatingandcostlysearch. Aswediscussinthenextsection,itisalsonotasmokinggunforanynon-Bayesianupdatingmodel.Whileapuzzle,weurge cautionasthisisasinglestudy’sresult.10Replicationinothercontextsisneeded.

4. Discussionandconclusion

Thispaperreportstheresultsofanovelexperimenttoidentifythecausaleffectoflearningandknowledgeaboutan environmentalgoodonhowpeoplevaluethatgood.Wedesignedanexperimentwhichidentifiesexanteknowledgelevels, exogenouslyvariesinformationprovidedtosubjects,elicitsvaluationsforthegoodusingstatedpreferencemethods,and finallyidentifiesexpostknowledgelevels.Theresultsforlearningshowthatprovidingsubjectswithmorenewinformation causessignificantlymorelearning.However,wefindthatobservedlearningisincomplete.Wealsofindthelikelihoodthata subjectlearnsapieceofnewinformationdecreasesasthesubjectispresentedwithincreasingamountsofnewinformation, aresultwhichisconsistentwithmodelsoffatigue.Ourfindings,therefore,suggestthatlearningisimperfectandvarieswith theamountofnewinformationpresented.Thereis,however,anendogeneityconcern:ifasubjectcaresmoreaboutthetopic itcouldbethattheyarewillingtousemoreeffortinordertoretaintheadditionalinformationprovided.Thiswastestedfor byincludingpersonalrelevanceandmotivationvariableswhenregressingtype-treatmentpairsonthesecondquizscore. Floodriskcharacteristicswerenotsignificant,whichsuggeststherewasnorelationshipbetweenpersonalmotivationand learning.

Theresultsofthevaluationportionoftheexperimentshowthatexogenousincreasesinknowledgeaboutthegood’s attributes(bothincreasedfloodprotectionandincreasedwildlifeabundance)didnotaltersubjects’valuationforthegood; ourevidenceisthusconsistentwithanabsenceofknowledge-basedpreferenceformationwithinasurvey.Information learnedalsohasnosignificanteffectonthevarianceofstatedWTP.Exanteknowledge,however,mattersagreatdealtothe valuepeopleplacedonthewetlandsproject.

Thelearningresults,coupledwiththevaluationresults,areconsistentwiththreedifferentmodelsofupdatingand preferenceformation:oneconsistentwithneutralinformationprocessingandtwo whichdepartfromtheneoclassical model.ThefirstpossiblemodelisaneoclassicalmodelofcostlysearchsimilarinspirittoCaplinetal.(2011):agentsuse costlyefforttoseekoutandlearninformationuptothepointwheretheexpectedmarginalcostoflearningisequaltothe expectedmarginalbenefit11.Ifendogenouslyacquiredknowledgeabout“good”attributesisvaluedaccordingtounderlying heterogeneouspreferences,theprovisionofadditionalknowledgewillnotaffectpre-existingvaluationlevels.Furthermore, exantelevelsofknowledgecouldeasilycorrelatewithvaluationsinasystematicway:forexample,peopleinthefloodplain maybothknowmoreaboutthefloodmitigationpotentialofwetlandsandbewillingtopaymoreforwetlandrestoration. Thistypeofmodelalsobearssomesimilaritiestootherrecentbehavioralmodelsofcostlyattention(Caplinetal.,2011; Hannaetal.,2014;Schwartzstein,2014).

Second,ourresultsareconsistentwithimperfectlearningcoupledwithconfirmationbiassimilartoRabinandSchrag (1999).Importantly,thisinterpretationrequiresthatwetestedforbothlearningandchangesinvaluations.Withoutverifying

9FulldiscussiontheanalysisandtableofresultscanbefoundinAppendixB.

10Astudywiththesamedesignbutwithachoiceexperiment(CE)elicitationformatwouldbebettersuitedtoaddressthatquestion.Apaymentcard onlyoffersasingleobservationpersubjectwhereasaCEallowsforamultipleobservationsbetweensubjects.Asaresult,aCEformatisbettersuitedto estimatethemarginalimpactofknowledgeonpreferencesacrosssubjectsindifferenttreatments(e.g.,thescaleparameter).Thisisanintriguinglineof futureresearch.

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thatlearningoccurs-evenincompletelearning-itispossiblethatsubjectshavenoopportunitytoupdatevaluationsbecause thedifferinglevelsofinformationembeddedindifferentinformationtreatmentswerenotactuallylearned12.

Third,itcouldbethatlearningcanoccurinstantaneouslybutpreferenceformationtakestime.Giventhatourexperiment takesplaceover10–25min,wearenotabletoidentifyanychangesinvaluationwhichmaytakelongertoevolve.While wearenotawareofanymodelsofpreferenceformationwiththisdualtimingfeature,itisonepossibleexplanationforour findings.Further,fromastatedpreferencesurveydesignperspective,the10–25mintimeintervalistherelevantone.

AdrawbackofthisresearchwasnotincludingaquestiononpreferenceuncertaintyfollowingtheWTPquestion.Loomis andEkstrand(1998)demonstratedintheirworkonowlconservationthatrespondentswithahigherpriorknowledgeof thegoodweremorecertainabouttheirpreferences.Ausefuladditiontothissurveywouldhavebeentoexplorewhether preferenceuncertaintywasinfluencedbyrespondents’priorknowledgeortheadditionalinformationpresentedtothem. Furthermore,allowingrespondentsmorevariabilityinthepaymentcardformati.e.beingabletoticktheamountstheyare certaintheywouldpayandbeingallowedtoleaveagapbetweenthatandtheamountstheycertainlywouldnotpay,as usedbyHanleyetal.,(2009)mayhavealsoshowndifferencesbetweenthetype-treatmentgroups.

Werecognizethatanine-questionmultiplechoicequizisanimperfectmeasureofknowledge.Therearetwoissues: onethatthetestismultiplechoiceandtheotherthatitisonlyninequestions.However,almostallOECDcountriesuse multiplechoicequestionstoteststudents’knowledgeofuse.TheSATisthemostimportantsingletestforcollegeplacement intheU.S.andisalmostentirelymultiplechoice.Economicsfacultiesalsooftenusemultiplechoiceteststoevaluatestudent knowledge.Anotherissueisthatthelengthofthemultiplechoicequizistooshort.Herewerelyonthelawoflargenumbers: onaveragelessinformedsubjectswillperformworseonamultiplechoicequizthanmoreinformedsubjects.Becausewe givethetesttoover500subjects,onaveragethepeoplethatperformwellonthetestknowmoreandthepeoplethat performworseknowless.Whileoneindividualmightgetlucky,wehaveasufficientlylargesamplesizesothatonaverage LtypesknowlessabouttheinformationthequizthanMtypeswhoknowlessthanHtypes.Putanotherway,asinglelow knowledgetypewhoisclassifiedasanMduetoluckwillwashoutonaverage.Asfurtherevidencethattypesarenotrandom, LtypeslearnmorewhengiventheHtreatmentrelativetotheMtreatmentrelativetotheLtreatment.Insum,becauseof thewidespreaduseofmultiple-choicetestsineducation,thelawoflargenumbersandthestatisticallysignificantevidence thatsubjectsindifferentexantegroupslearnrelativelymorewhengivenadditionalinformation,weareconfidentinthe validityofusinganine-questionmultiplechoicequiztogetsignalonknowledgelevels.

Afurtherlimitationofoursurveycouldbethehighproportionofrespondentssupportingtheproposal(83%).Flooding andfloodriskisanemotiveissue,andastheresultsshowahighnumberofrespondentssupportedthescheme.Thisraises thequestionastowhetherourfindingswouldbevalidforalesspreferredorlessfamiliargood.Respondentswhowere mostconcernedaboutwhethertheirhomeorlocalareawouldbeprotectedwerelikelytobesolelyinterestedintheflood reductionbenefitsofthegood(informationonwhichwaspresentedtoallrespondentsinthestandardelicitationscenario) andchosetoignoreadditionalinformationonecosystemserviceprovisionwhenforming/statingtheirpreferences.This maynotbethecaseforamoreunfamiliarorlesswellreceivedgood.

Thefactthatthenewinformationprovidedtorespondentsinoursurveydidnotaffectthemeanorthevarianceofthe WTPdistributioncouldhaveimplicationsforstatedpreferenceinstrumentdesigniftheresultsareshowntobeexternally valid.Wefindthatrespondents’exante(pre-survey)levelofknowledgeaffectsthevaluetheyplaceontheenvironmental good.Respondentslearnsomeoftheinformationprovidedtothem,butthemarginaleffectsofthisinformationaredeclining. Inlinewithmoregeneralworkineconomics,ourresultsimplythatsurveyrespondentsinourstudycouldexhibitsomeof thesame“behavioral”updatingrulesrecentlydiscussedintheliterature.Similarmechanismsdevelopedtoaddressthese issuesinrevealedpreferencemarketsmightbeusefulinstatedpreferencemarketsaswelliftheresultsfromthissingle studyareexternallyvalid.Inthatsense,weviewthispaperasoneofmanylinkingbehavioralupdatingandpreference formationmodelstostatedpreferencesurveys.

However,weurgesomecautionininterpretingourfindings,asfurtherresearchisneededtoidentifytheirrobustness andtransferabilitywithinstatedpreferences.Theexternalvalidityofourfindingsoutsideofastatedpreferencecontextis alsouncertain.Itispossiblethatinrelativelylowstakesmicroleveldecisions,economicactorsdeviatefromdecisionrules usedinothercircumstances.Decisionsmadewithhigherstakesandbyexperienceddecisionmakersshould,therefore, beevaluatedaswell.Further,moreexperimentaldesignsareneededtoparsebetweenalternativemodelsoflearning, preferenceformationandvalueupdatingwhichwesketchinthispaper.

Acknowledgements

MCgratefullyacknowledgesthesupportoftheNationalScienceCentreofPoland(Opus2017/25/B/HS4/01076). ThisstudywaspartofKN’sPhDunderthesupervisionofNH.ThisstudywassupportedbyMASTS(MarineAlliancefor ScienceandTechnologyforScotlandGrantReferenceHR09011).KNgratefullyacknowledgesthefinancialsupportreceived duringherPhDfromScottishNaturalHeritageandScottishEnvironmentProtectionAgency.

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TableA1

Exanteinformationandexpostinformationlevels.Importantly,thecellsinthistabledonotnecessarilycorrespondtoanyparticulartreatment.Thistable representsallpossiblescenarios,assumingperfectrecall,forhowmuchinformationasubjectcanhaveaftertreatmentassumingthateachupdatingrule isfeasible. ExAnteInformation ExPostInformation L M H Hinfo LH MH HH Minfo LM MM — Linfo LL — —

AppendixA. Alternativemodelsofupdating

Inthispaperweareabletohorseraceseveraldifferentlearningandpreferenceformation:welistpossiblefindingsas consistentorinconsistentwithdifferentmodels.Ifwerejectanullhypothesis,we,therefore,rejectthemodelassociated withit.Alternatively,ifwefailtorejectanullhypothesis,ourfindingsareconsistentwiththatparticularmodeloflearning orpreferenceformation(insofaraspreferencesarerelatedtovaluations).

A.1Learninghypotheses

OnewaytothinkaboutthecausaleffectofinformationonknowledgeisfromestimatingEq.(A1). Q2Scorei=X i+1

LLi,LMi,LHi

LL+1

LMi,LHi

LM+1

LHi

LH +1

MMi,MHi

MM+ 1

MHi

MH+1

HHi

HH+εi (A1)

TableA1highlightsthepossibleexanteandexpostinformationlevels.First,therearethreeinformationpairsthatare notfeasiblebecausewedidnotuseredundanttreatments:ML,HLandHM.Forexample,anindividualwithanexante highinformationsetshouldneverloseinformationbecausetheyareremindedofasubsetofinformationtheyalready knew.Second,therearethreeinformationpairsinwhichminimalornolearningoccurs:LL,MMandHH.Theeffectofthese informationpairingsonlearning(e.g.,thefirstequation)istheincreaseinscoregivenbytheestimatedcoefficientsLL,MM,

andHH.Third,therearethreeinformationpairingsinwhichsomelearningmightoccur:LM,LHandMH.Themarginal

effectofnewinformationonthescoreisgivenbyLM,LH,andMH.

Nowconsiderthesignificanceofcoefficientswhichwouldbeconsistentwithdifferenttypesoflearning.Weareableto horseracethreedifferentmodelsoflearning.

1)NoLearning–H0:LM=LH=0,MH=0

Inthiscase,onlyaprioriinformationdeterminessubsequentsecondquizscores. 2)CompleteLearning–H0:LL+LM=MM,LL+LM+LH=MM+MH=HH

Inthiscase,theinformationtreatmentfullydeterminesexpostinformationlevels. 3)IncompleteLearning–H0:LM>0,LH>0,MH>0

Inthiscase,typeLindividualscannotfullylearninthehighinformationtreatment.Inaddition,subjectscouldexhibit fatiguewhentheylearn.Forexample,theabilityofsubjectstoretainthemarginalpieceofinformationcoulddecreasein theamountofinformationtheyareprovidedwith.

4)Fatigue-H0:LH<LM

Inthecaseoffatigue,retentionratesarehigherwhenthesubjectisprovidedwithlessinformation.Notethatfatiguecan jointlyoccurwithincompletelearning.Further,fatiguecouldbeacauseofincompletelearningif,forexample,subjectsin theLHandLMinformationtreatmentsdonothavesignificantlydifferentlevelsofexpostknowledge.

A.2Preferenceformation/valuationhypotheses

Conditionalonlearning,thereisstillaquestionofhownewknowledgeaboutthegood’sattributesaffectsWTP.Our designandtheempiricalspecificationinEq.(2)allowsustocontrolforexanteattributeknowledgelevelssothatthe marginaleffectofknowledgecanvaryasafunctionofexanteknowledgelevels.Thisiswhatdistinguisheslearningand

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preferenceformationinourstudy.Forexample,itisnotnecessarilythecasethatthetwoindividualsthathavethesame amountofretainedinformationaftertreatmenthavethesameWTPforthegood.Giventhedesignofthisexperiment,we canhorseracedifferentmodelsofhowadditionalinformationaffectsWTP.Todoso,weconsiderthemodelsbelowthatuse thevaluationestimatingEq.(A2).Inordertointerpreteachmodel,therearerestrictionsonthelearningresultswhichmust coincidewiththevaluationbasedpreferenceresults.

WTPi=X i+1

LLi,LMi,LHi

ωLL+1

LMi,LHi

ωLM+1

LHi

ωLH+1

MMi,MHi

ωMM +1

MHi

ωMH+1

HHi

ωHH+εi (A2)

1)Knowledge-basedpreferenceupdating–H0:ωLM =/ 0,ωLH=/ 0,ωMH =/ 0

Knowledge-basedpreferenceupdatingimpliesthatsubjects’WTPisdeterminedbytheexpostknowledgelevelsof knowledge.Inorderforthisresulttobeconsistentwithknowledge-basedratherthaninformation-basedupdating,though, thisfindingmustcoincidewitheithercompleteorincompletelearning.Ifinstead,thisempiricalresultoccursjointlywithno learningthenthisempiricalfindingwouldbeconsistentwithinformation-basedpreferenceupdatingratherthanknowledge -basedvaluationupdating.

Itispossiblethatdifferenttypesofknowledge-basedpreferenceupdatingaremoreinformative,fromascientific per-spective,thanothers.Considerthefollowing:

2)Ex-postknowledgepreferenceupdating–

H0:ωLL+ωLM+ωLH=ωMM+ωMH=ωHH,ωLL+ωLM=ωMM

Ex-postknowledgepreferenceupdatingimpliesthatonlyexpostknowledgelevelscorrelatewithvaluationandexante levelsdonot.Itisconsistentwithknowledgeaboutgoodattributeshavingauniformeffect(e.g.,priorknowledgelevels don’tmatter,onlyknowledgelevelsatthetimeofWTPelicitation).

3)ExanteKnowledge-basedpreferences–H0:ωLM=ωLH=0,ωMH=0

Iflearningoccursbutvaluationsdonotchangeasafunctionofnewknowledgethenvaluationsarenotafunctionofex postinformationlevels.Inthiscase,theendogenousacquisitionofexanteknowledgebeforetheexperimentfullydictates theWTPofagents.Therearethreedifferentmodelsconsistentwiththisresult.

First,agentscouldinterpretlearnedinformationasconfirmingwhattheyalreadyunderstoodregardingtheirpreferences forthegood,consistentwithconfirmatorybiasasinRabinandSchrag(1999).Asaresult,confirmationbiasisjointhypotheses acrossboththelearningregressions(e.g.,theremustbeeithercompleteorincompletelearning)andtheresultsofthe confirmationbiascoefficientsabove.

Second,agentscoulduseendogenouslychosenlevelsofcostlyeffortbeforetheexperimenttolearnuptothepointwhere themarginalcostoflearningislessthantheexpectedmarginalbenefit(e.g.,learningincreaseswelfarefromadecrease indecisionerrors).Iftheseendogenouslyacquiredpriorsareunbiasedrelativetounderlyingheterogeneouspreferences, additionalinformationwillnotaffectpre-existingvaluationlevels.Thismodelbearssimilaritytobanditmodelsofcostly searchwhereheterogeneouspreferencescreatevariationinthemarginalbenefitofobtainingknowledge(Caplinetal., 2011).

Third,thisresultisalsoconsistentwithatiminggapbetweenlearningandpreferenceformation.Itcouldbethatsubjects exhibitknowledge-basedpreferenceformationbutpreferencestaketimetoformandareonlyformeduponreflection.We arenotawareofanyeconomicmodelwhichpositsthatpreferencesareformedinthiswaybutwecannotruleitoutas anexplanation.Wearealsonotawareofanyextantexperimentaldesigndesignedtoparsebetweenthefirsttwomodels althoughidentifyingthisthirdmodelcouldconceivablybeperformedbutelicitingvaluationsatdifferentpointsintime.

Therearetwocaveatstoconfirmationbiasandendogenouscostlyeffort.First,nothinginprinciplepreventsendogenous costlyeffortandconfirmationbiasfromoccurringsimultaneously.Indeedseparatelyidentifyingthesetwomodelscouldbe challengingtofutureresearchers.Second,ifendogenouslyacquiredknowledgelevelsarecorrelatedwithpreferencethen weexpecttoobserve:ωLL =/ ωMM =/ ωHH =/ 0.Forexample,aconsumerwhohasahigherWTPtoattendatennismatch

mayknowmoreabouttennis,ceterisparibus.

1)NoKnowledge-basedpreferences–H0:ωLL=ωMM=ωHH,ωLM=ωLH=ωMH=0

Iflearningoccursbutknowledgeisorthogonaltopreferencesthentherewouldbenostatisticallysignificantdifference betweenexantelevelsofinformation,expostlevelsofinformationandvalueforthegood.Thisfindingwouldindicatethat otherfactorsratherthanknowledgeofthegood’sattributesdrivesheterogeneouspreferencesforgoods.

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