Open AccessDecision‐maker expectations and the value of climate prediction information: conceptual considerations and preliminary evidence
Author(s) -
Sherrick Bruce J,
Sonka Steven T,
Lamb Peter J,
Mazzocco Michael A
Publication year - 2000
Publication title -
meteorological applications
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.672
H-Index - 59
eISSN - 1469-8080
pISSN - 1350-4827
DOI - 10.1017/s1350482700001584
Subject(s) - valuation (finance) , decision maker , affect (linguistics) , econometrics , value (mathematics) , climate change , value of information , economics , actuarial science , statistics , mathematics , psychology , management science , mathematical economics , biology , ecology , communication , finance
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. Copyright © 2000 Royal Meteorological Society