Abstract

ABSTRACT:

We study the use of discrete choice models in the context of recreation when there may be discrepancy between the anticipated (ex ante) and the experienced quality of site attributes due to imperfect information. Unlike previous literature on the topic, we relax the assumption of risk neutrality. Adopting a model with quasi-linear preferences, we characterize the disparity between ex ante and ex post utility by decomposing expected utility into a term stemming from bias in beliefs and a component representing willingness to pay for reducing uncertainty in site attributes. Our results show that ex post corrections of welfare losses are attenuated by greater dispersion in beliefs about amenities. (JEL D61, Q26)

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Additional Information

ISSN
1543-8325
Print ISSN
0023-7639
Pages
pp. 43-55
Launched on MUSE
2020-02-06
Open Access
No
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