Determinants of stated willingness to pay for public goods: A study in the headline method

Respondents were shown brief statements (“headlines”) referring to various threats to the environment or to public health, and other public issues. An intervention to deal with each problem was also introduced by a single sentence. Some respondents were asked to indicate their willingness to pay for the interventions by voluntary contributions. Others indicated their opinion of the intervention on a conventional rating scale, rated the personal satisfaction of contributing to it, or rated the importance of the problem. Group averages of these response measures were obtained for a large set of issues. Computed over issues, the rank-order correlations between the different measures were very high, suggesting that group averages of WTP and of other opinion statements are measures of the same public attitudes. Observed preference reversals and violations of monotonicity in contributions are better explained by a concept of attitude than by the notion of economic value that underlies the contingent valuation method. Contributions and purchases do not follow the same logic. Possible implications for the contingent valuation method are discussed.     

Correlations,causes and heuristics in surveys of life satisfaction

Satisfaction with life domains is more highly correlated with interpersonal than with intrapersonal comparisons (Emmons and Diener, 1985). The hypothesis of the present studies is that the high correlations reflect inferences of social comparison from global satisfaction. Paradoxically, such inferences are most likely in private domains (love life, friends), where social information is scarce and relatively unimportant as a determinant of satisfaction. Study I replicates the Emmons-Diener findings, but also finds that subjects judge recent changes more important than social standing as a determinant of life satisfaction, especially in private domains. Study II examines an order effect in judgments of satisfaction. As hypothesized the correlation between social comparison and global satisfaction is higher (in private domains only) when global satisfaction is judged first than when the order of judgment is reversed.     

Shared Outrage and Erratic Awards: The Psychology of Punitive Damages

An experimental study of punitive damage awards in personal injury cases was conducted, using jury-eligible respondents. There was substantial consensus on judgments of the outrageousness of a defendant's actions and of the appropriate severity of punishment. Judgments of dollar awards made by individuals and synthetic juries were much more erratic. These results are familiar characteristics of judgments made on unbounded magnitude scales. The degree of harm suffered by the plaintiff and the size of the firm had a pronounced effect on awards. Some judgmental tasks are far easier than others for juries to perform, and reform possibilities should exploit this fact.     

Advances in prospect theory: Cumulative representation of uncertainty

We develop a new version of prospect theory that employs cumulative rather than separable decision weights and extends the theory in several respects. This version, called cumulative prospect theory, applies to uncertain as well as to risky prospects with any number of outcomes, and it allows different weighting functions for gains and for losses. Two principles, diminishing sensitivity and loss aversion, are invoked to explain the characteristic curvature of the value function and the weighting functions. A review of the experimental evidence and the results of a new experiment confirm a distinctive fourfold pattern of risk attitudes: risk aversion for gains and risk seeking for losses of high probability; risk seeking for gains and risk aversion for losses of low probability.This article has benefited from discussions with Colin Camerer, Chew Soo-Hong, David Freedman, and David H. Krantz. We are especially grateful to Peter P. Wakker for his invaluable input and contribution to the axiomatic analysis. We are indebted to Richard Gonzalez and Amy Hayes for running the experiment and analyzing the data. This work was supported by Grants 89-0064 and 88-0206 from the Air Force Office of Scientific Research, by Grant SES-9109535 from the National Science Foundation, and by the Sloan Foundation.     

A Comparison of Affect Ratings Obtained with Ecological Momentary Assessment and the Day Reconstruction Method

Measurement of affective states in everyday life is of fundamental importance in many types of quality of life, health, and psychological research. Ecological momentary assessment (EMA) is the recognized method of choice, but the respondent burden can be high. The day reconstruction method (DRM) was developed by Kahneman and colleagues (Science, 2004, 306, 1776–1780) to assess affect, activities and time use in everyday life. We sought to validate DRM affect ratings by comparison with contemporaneous EMA ratings in a sample of 94 working women monitored over work and leisure days. Six EMA ratings of happiness, tiredness, stress, and anger/frustration were obtained over each 24 h period, and were compared with DRM ratings for the same hour, recorded retrospectively at the end of the day. Similar profiles of affect intensity were recorded with the two techniques. The between-person correlations adjusted for attenuation ranged from 0.58 (stress, working day) to 0.90 (happiness, leisure day). The strength of associations was not related to age, educational attainment, or depressed mood. We conclude that the DRM provides reasonably reliable estimates both of the intensity of affect and variations in affect over the day, so is a valuable instrument for the measurement of everyday experience in health and social research.     

Economic Preferences or Attitude Expressions?: An Analysis of Dollar Responses to Public Issues

Participants in contingent valuation surveys and jurors setting punitive damages in civil trials provide answers denominated in dollars. These answers are better understood as expressions of attitudes than as indications of economic preferences. Well-established characteristics of attitudes and of the core process of affective valuation explain several robust features of dollar responses: high correlations with other measures of attractiveness or aversiveness, insensitivity to scope, preference reversals, and the high variability of dollar responses relative to other measures of the same attitude.     

Making Low Probabilities Useful

This paper explores how people process information on low probability-high consequence negative events and what it will take to get individuals to be sensitive to the likelihood of these types of accidents or disasters. In a set of experiments, information is presented to individuals on the likelihood of serious accidents from a chemical facility. Comparisons are made with other risks, such as fatalities from automobile accidents, to see whether laypersons can determine the relative safety of different plants. We conclude that fairly rich context information must be available for people to be able to judge differences between low probabilities. In particular, it appears that one needs to present comparison scenarios that are located on the probability scale to evoke people's own feelings of risk. The concept of evaluability recently introduced by Hsee and his colleagues provides a useful explanation of these findings.