Preferences after pan(dem)ics: Time and risk in the shadow of COVID-19

Abstract

This paper uses the COVID-19 health crisis to study how individual preferences respond to generalized traumatic events. We review previous literature on natural and man-made disasters. Using incentive-compatible tasks, we simultaneously estimate risk and ambiguity aversion, time discounting, present bias, and prudence parameters before, during, and after the COVID-19 lockdown in France. We find patience, risk aversion, and ambiguity aversion fell during lockdown, then gradually returned toward their initial levels 4 months later. These results have implications for health and economic policies, and deepen our understanding of the responses – and resilience – of economic preferences to traumatic events.

A neuroscience-based analysis of impacts of disaster memory on economic valuation.

“…For example, studies have found changes in risk sensitivity in survivors of floods and typhoons (Abatayo & Lynham, 2020; Cassar et al, 2017). These changes could arise from changes in loss aversion sensitivity from increased assessments of risk on the one hand or from desires to increase risk to make up for losses on the other (Gassman et al, 2022; Shupp et al, 2017).…”

“…We emphasized in this article that effective climate change policy will require a deep understanding of how people process damaging events and the role that memories of the event play in future evaluations of climate change-affected assets. Whether longer term, slowly developing phenomena such as pandemics (Gassman et al, 2022; Jester et al, 2018; Vinitzky-Seroussi & Jalfim Maraschin, 2021) produce similar or different effects on memory with corresponding consequences for future decision-making will be an important direction for future research.…”

Preference Shifts During Health Shocks: Foreign Tourists’ Expenditure–Price Elasticity Throughout the Pandemic

“…This implies that the pandemic and the uncertainty surrounding its evolution and future recurrences produce less self-control and greater demand for immediate reward à la Gul and Pesendorfer (2001) , which might result in overspending. 1 Along these lines, Gassmann et al (2022) show that patience and risk aversion declined during the first wave of the pandemic, concluding that traumatic events change behavioral preferences. All in all, a second research hypothesis is the following:…”

“…1 Along these lines, Gassmann et al (2022) show that patience and risk aversion declined during the first wave of the pandemic, concluding that traumatic events change behavioral preferences. All in all, a second research hypothesis is the following: H2: Under preference change, consumers' greater demand for hygiene and safety under quality uncertainty together with potential endowment effects for risk that lowers risk aversion make tourists to become more price inelastic, thereby increasing their expenditure-price elasticity with respect to tourism goods during the pandemic.…”

Permanent Instability of Preferences after COVID-19 Crisis: A Natural Experiment from Urban Burkina Faso

“…Third, we contribute to the literature on Covid-19 related preference change (Castillo and Hernandez, 2022;Aragon et al, 2022;Angrisani et al, 2020;Drichoutis and Nayga, 2022;Gassmann et al, 2022;Bu et al, 2020;Li et al, 2020;Ikeda et al, 2020;Shachat et al, 2021). Most of these articles use small samples and very specific populations (mainly students or informed internet users) that may not consistently reflect behaviors in the field due to their singular characteristics.…”