Designing the Financial Tools to Promote Universal Access to AIDS Care.

We argue that reluctance to invest in drug treatments to fight the AIDS epidemics in developing countries is largely motivated by severe losses occurring from the future albeit uncertain appearance of a curative vaccine. We design a set of securities generating full insurance coverage against such losses, while achieving full risk-sharing with vaccine development agencies. In a general equilibrium framework, we show that those securities are demanded to improve social welfare in developing countries, to increase current investment in treatments and the provision of public goods. Even though designed foi AIDS, those securities can also be applied to other epidemics such as Malaria and Tuberculosis.HIV/Aids funding, security design, therapeutic innovation,health underinvestment, HIV/Aids vaccine

Changing time and emotions

In this paper, we consider that our experience of time (to come) depends on the emotions we feel when we imagine future pleasant or unpleasant events. A positive emotion such as relief or joy associated with a pleasant event that will happen in the future induces impatience. Impatience, in our context, implies that the experience of time up to the forthcoming event expands. A negative emotion such as grief or frustration associatedwith an unpleasant event thatwill happen in the future triggers anxiety. This will give the experience of time contraction. Time, therefore, is not exogeneously given to the individual and emotions, which link together events or situations, are a constitutive ingredient of time experience. Our theory can explain experimental evidence which shows that people tend to prefer to perform painful actions earlier than pleasurable ones, contrary to the predictions yielded by the standard exponential discounting framework.experience of time ; emotions ; impatience ; anxiety ; discount factor ; time preference

Heterogeneous anchoring in dichotomous choice valuation framework

This article addresses the important issue of anchoring in contingent valuation surveys that use the double-bounded elicitation format. Anchoring occurs when responses to the follow-up dichotomous choice valuation question are influenced by the bid presented in the initial dichotomous choice question. Specifically, we adapt a theory from psychology to characterize respondents as those who are likely to anchor and those who are not. Using a model developed by Herriges and Shogren (1996), our method appears successful in discriminating between those who anchor and those who did not. An important result is that when controlling for anchoring - and allowing the degree of anchoring to differ between respondent groups - the efficiency of the double-bounded welfare estimate is greater than for the initial dichotomous choice question. This contrasts with earlier research that finds that the potential efficiency gain from the double-bounded questions is lost when anchoring is controlled for and that we are better off not asking follow-up questions.Anchoring; Contingent Valuation; Heterogeneity; Framing effects

Monetary Values for Air Pollution Risk of Death: A Contingent Valuation Survey

In this paper, we extend the individual dynamic model of life-time resource allocation to assess the monetary value given to the increase in survival probabilities of every member of a household induced by improved air quality. We then interpret this monetary value as a flow of Value of Life Years Lost (VOLY), and estimate the corresponding Value of a Prevented Fatality (VPF) for different ages and different household members. Using French contingent valuation data on air pollution, we estimate a mean VOLY of Euros 150,000 and a mean VPFof Euros 2.15 million. In addition, we find an inverse U-shaped relationship between age and VPF

Social psychology and environmental economics : a new look at ex ante corrections of biased preference evaluation

Environmental economics is now a long standing field of research ; much has been learned on how environmental policy can use incentives to drive individual behaviors. Among the many examples, preference elicitation is the most discussed case in which incentives fail to accurately implement efficient behavior. Using this as our motivating example, herein we explore the cross-fertilization between environmental economics and social psychology. We first review how the lessons drawn from social psychology helped address the hypothetical bias issue. We then turn to the future of this process by focusing on how cheap talk scripts influence preference elicitation. Our experimental results shows CT scripts work through persuasion – i.e. changes mind, but poorly changes actions. in that sense, preference elicitation still lacks a way of making communication binding – i.e. a way to alter intrinsic motivation of subjects to behave truthfully.Social psychology, commitment, persuasive communication, preference elicitation.

Referenda under Oath

Herein we explore whether a solemn oath can eliminate hypothetical bias in a voting referenda, a design commonly promoted in nonmarket valuation exercises for its incentive compatibility properties. First, we reject the null hypothesis that a hypothetical bias does not exist. Second, we cannot reject the hypothesis that people who sign an oath are as likely to vote for the public good (e.g., wind energy R&D) in a hypothetical referenda as in a real one. This result opens interesting avenues for improving the elicitation of preferences in the lab.Dichotomous Choice Mechanism; Hypothetical bias; Oath; Preference revelation

Social psychology and environmental economics: a new look at ex ante corrections of biased preference evaluation

The field of social psychology explores how a person behaves within the context of other people. The social context can play a substantive role in non-market allocation decisions given peoples choices and values extend beyond the classic market-based exchange institution. Herein we explore how social psychology has affected one aspect of environmental economics: preference elicitation through survey work. We discuss social representation, social isolation, framing through cheap talk, and commitment theory through an oath.Social psychology;Commitment;Persuasive communication;Preference elicitation

A TEST OF CHEAP TALK IN DIFFERENT HYPOTHETICAL CONTEXTS: THE CASE OF AIR POLLUTION

We explore the influence of a neutral cheap talk script in three typical scenarios used in the CV literature devoted to the valuation of air pollution effects. We show that cheap talk has a differentiated effect depending on the scenario implemented. It decreases protest responses with no effect on WTP values in the scenario based on a new drug. When a move to a less polluted city is involved, it has no effect on protest responses but decreases WTP values. Surprisingly, cheap talk increases protest responses but decreases WTP values when new regional air pollution regulations are at stake.Willingness to pay ; contingent valuation ; cheap talk ; context ; field experiment ; air pollution

Designing the Financial Tools to Promote Universal Access to AIDS Care*

We argue that reluctance to invest in drug treatments to fight the AIDS epidemic in developing countries is largely motivated by servere losses occuring from the future albeit uncertain appearance of a curative vaccine. We design a set of secutities generating full insurance coverage against such losses, while achieving full risk-sharing with vacccine development agencies. In a general equilibrium framework, we show that those securities are demanded to improve social welfare in developing countries, to increase current investment in treatmeans and provision of public good. Even though designed for AIDS, those securities can also be applied to other epidemics such as Malaria and Tuberculosis

Do people always pay less than they say? Testbed laboratory experiments with IV and HG values

Hypothetical bias is a long-standing issue in stated preference and contingent valuation studies - people tend to overstate their preferences when they do not experience the real monetary consequences of their decision. This view, however, has been challenged by recent evidence based on the elicitation of induced values (IV) in the lab and homegrown (HG) demand function from different countries. This paper uses an experimental design to assess the extent and relevance of hypothetical bias in demand elicitation exercises for both IV and HG values. For testbed purpose, we use a classic second-price auction to elicit preferences. Comparing the demand curve we elicit in both, hypothetical bias unambiguously (i) vanishes in an induced-value, private good context, and (ii) persists in homegrown values elicitation context. This suggests hypothetical bias in preference elicitation appears to be driven by "preference formation" rather than "preference elicitation". In addition, companion treatments highlight two sources of the discrepancy observed in the HG setting: the hypothetical context leads bidders to underestimate the constraints imposed by their budget limitations, whereas the real context creates pressure leading them to bid "zero" to opt out from the elicitation mechanism. As a result, there is a need for a demand elicitation procedure that helps subjects take the valuation exercise sincerely, but without putting extra pressure on them.Auctions; Demand revelation; Experimental valuation; Hypothetical bias