Conference Agenda

Using point estimates of willingness to pay (WTP) to value market and non-market goods may bias results because people often have a range of acceptable values. We investigate how individuals express their WTP given uniform and skewed intervals of private values with two demand-revealing auction mechanisms: a second-price auction and a random nth-price auction. We find that individuals, when given skewed interval values, bid truthfully in the second-price auction. However, the random nth-price auction performs better when individuals are provided uniform interval values. The mean of interval bids can be used to derive the demand for true WTP for a good with value uncertainty.

We expand a conventional Real Business Cycle (RBC) model incorporating environmental

regulation and heterogeneous firms in order to investigate the interrelationships between

firm heterogeneity, environmental policy, and economic uncertainty. The findings are as

follows: First, the impact of the environmental regulation on macroeconomic volatility

is significantly influenced by the source of business-cycle variation. Second, firm hetero-

geneity has relevant implications for macroeconomic volatility, regardless of the origin of

the macroeconomic shock. Finally, the dynamics of the distribution of capital stocks and

productivity across productive plants cause the aggregate reaction to the stricter environ-

mental policy to be nonlinear, implying a different macroeconomic adjustment than the

analogous Representative agent counterpart. The key micro-parameters are estimated

consistently with data of regulated firms under the EU Emissions Trading System (EU

ETS).

The consensus among economists in favour of carbon taxes over permits is based on a groundbreaking result due to Weitzman ('Prices vs Quantities', RESTUD 1974). It assumes, however, a probability distribution over abatement costs and damages. As many have argued, current climate uncertainties are far more severe, and do not justify any such distribution. This paper reconsiders the tax-permit comparison in the presence of severe or Knightian uncertainty, drawing on the workhorse maxmin-EU model from the literature on decision under ambiguity ('Maxmin expected utility with a non-unqiue prior', Gilboa & Schmeidler, J Math Econ, 1989). Our main result shows that optimally set permits are strictly more efficient than optimal taxes when uncertainty concerning the slope of marginal abatement costs is severe. It suggests that, given the uncertainty reported in the latest IPCC report, permit policies should be preferred.

Collective action problems emerge when individual incentives and group interests are misaligned, as in the case of climate change. Individuals facing collective action problems are often considered to have two options: contribute towards a public solution or free-ride. But they might also choose a third option of investing in a private solution such as local climate change adaptation. Experimental research on the dynamics of collective action problems has rarely accounted for the availability of private solutions and has been conducted in single-country contexts (with few exceptions) thereby lacking generalisability. Here we introduce an experimental collective action problem featuring wealth inequalities, public and private solutions, and (n = 5,200) participants from 32 countries. We show that participants endowed with higher income consistently choose the private solution more often than those endowed with lower income (61% vs. 32%). This finding cannot be explained by cultural differences since it occurs in every country. Nor can it be explained by different origins of wealth (luck vs. merit). We also report that these participants endowed with higher income consistently contribute a lower proportion of their wealth towards public solutions than those endowed with lower income (32% vs. 40%); and that inequality increases as a result. Again, this pattern cannot be explained by cultural differences or different origins of wealth. Our findings highlight the risks associated with modern collective action problems in which the rich can afford to rely on private solutions while the poor remain unprotected.