The Importance of Loss Aversion in Public Preferences for Wetland Management Policies: Evidence from a Choice Experiment with Reference-Dependent Discrete Choice Model
Scientific analysis of public preferences for wetland management policies could provide valuable information for the management by government, where individual preferences can be affected by the loss aversion. Hence, this paper aims to clarify the importance of loss aversion in public preferences for wetland management scenarios based on a choice experiment described by five attributes: wetland acreage, biodiversity, water condition, natural landscape, and payment for wetland management. We constructed a random parameters model based on reference-dependent utility to derive testable hypotheses about how loss aversion affects public preferences for wetland management scenarios. The results suggest that the reference-dependent random parameters models are more appropriate to account for the choices of respondents, indicating loss aversion is an important choice driver for wetland management policies. Moreover, both the loss aversion parameters in reference-dependent random parameters models are greater than 1, implying that respondents consider the losses from the deterioration of the current wetland attribute status are more than the gains from the improvement. Especially, the choice preferences are different in the two choice paradigms, considering with and without loss aversion. Our findings have important implications for policy-makers, as the choice prediction will be inaccurate without considering the importance of the loss aversion.
KeywordsWetland management Loss aversion Choice experiment Reference-dependent Random parameters logit model
This study was supported by the National Natural Science Foundation of China (71874026 & 71171044). We would like to express our sincere thanks to the Forestry Bureau in Heilongjiang Province and the Sanjiang Wetland Nature Reserve Administration of China for their support and their help with our survey.
- Bierlaire M (2016) PythonBiogeme: a short introduction report TRANSP-OR 160706, series on Biogeme. Switzerland: Transport and Mobility Laboratory, School of Architecture, Civil and Environmental Engineering, Ecole Polytechnique Fédérale de LausanneGoogle Scholar
- Kim J, Park SY, Lee J (2018) Do people really want renewable energy? Who wants renewable energy?: discrete choice model of reference-dependent preference in South Korea. Energy Policy (In press) doi: https://doi.org/10.1016/j.enpol.2018.04.062
- Marre JB, Thébaud O, Pascoe S, Jennings S, Boncoeur J, Coglan L (2016) Is economic valuation of ecosystem services useful to decision-makers? Lessons learned from Australian coastal and marine management. Journal of Environmental Management 178:52–62. https://doi.org/10.1016/j.jenvman.2016.04.014 CrossRefGoogle Scholar
- McCain KW (2015) Mining full-text journal articles to assess obliteration by incorporation: Herbert a. Simon's concepts of bounded rationality and satisficing in economics, management, and psychology. Journal of the Association for Information Science and Technology 66:2187–2201. https://doi.org/10.1002/asi.23335 CrossRefGoogle Scholar
- Mcfadden D (1974) Conditional logit analysis of qualitative choice behavior. Frontiers in Econometrics Academic Press, New York, pp 105–141Google Scholar
- Millennium Ecosystem Assessment (2005) Ecosystems and human well-being: current states and trends. Island Press, WashingtonGoogle Scholar
- Sun T, Lin W, Chen G, Guo P, Zeng Y (2016) Wetland ecosystem health assessment through integrating remote sensing and inventory data with an assessment model for the Hangzhou Bay, China. Science of the Total Environment 566-567:627–640. https://doi.org/10.1016/j.scitotenv.2016.05.028 CrossRefGoogle Scholar
- Train, KE (2009) Discrete choice methods with simulation. Cambridge University Press, UKGoogle Scholar
- Wang Y, Yang J, Liang J, Qiang Y, Fang S, Gao M, Fan X, Yang G, Zhang B, Feng Y (2018) Analysis of the environmental behavior of farmers for non-point source pollution control and management in a water source protection area in China. Science of the Total Environment 633:1126–1135. https://doi.org/10.1016/j.scitotenv.2018.03.273 CrossRefGoogle Scholar
- Wen CH, Wu WN, Fu C (2017) Preferences for alternative travel arrangements in case of major flight delays: evidence from choice experiments with prospect theory. Transport Policy In press. https://doi.org/10.1016/j.tranpol.2017.02.005