TY - JOUR
T1 - Decision-maker expectations and the value of climate prediction information
T2 - Conceptual considerations and preliminary evidence
AU - Sherrick, Bruce J.
AU - Sonka, Steven T.
AU - Lamb, Peter J.
AU - Mazzocco, Michael A.
PY - 2000/12
Y1 - 2000/12
N2 - This paper examines the commonly used assumption that decision-makers possess accurate prior probability information about climate events that affect their well-being, and illustrates the impact of that assumption on the valuation of prediction information. A survey of large producers in the Mid-western United States is used to recover their prior beliefs about climate variables. It is found that producers systematically misrepresent the probabilities of climate events that materially affect their well-being. In particular, the most common form of the miscalibration between actual and subjective probabilities is to overstate the likelihood of adverse events and understate the likelihood of favourable events. As a result, common methods for valuing prediction information are likely to understate the true value when recipients begin with less accurate prior beliefs.
AB - This paper examines the commonly used assumption that decision-makers possess accurate prior probability information about climate events that affect their well-being, and illustrates the impact of that assumption on the valuation of prediction information. A survey of large producers in the Mid-western United States is used to recover their prior beliefs about climate variables. It is found that producers systematically misrepresent the probabilities of climate events that materially affect their well-being. In particular, the most common form of the miscalibration between actual and subjective probabilities is to overstate the likelihood of adverse events and understate the likelihood of favourable events. As a result, common methods for valuing prediction information are likely to understate the true value when recipients begin with less accurate prior beliefs.
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U2 - 10.1017/S1350482700001584
DO - 10.1017/S1350482700001584
M3 - Article
AN - SCOPUS:0040519864
SN - 1350-4827
VL - 7
SP - 377
EP - 386
JO - Meteorological Applications
JF - Meteorological Applications
IS - 4
ER -