Climate change adaptation - Insights from behavioral and experimental economics

This thesis consists of six self-contained chapters that draw from applied behavioral economics to study risk perception in the context of extreme climate events. All chapters are motivated by observations of adaptation choices and gaining a deeper understanding of the human side of climate change adaptation. The introduction sets the stage by presenting the motivation for the study, introducing the main research questions and providing a schematic overview of the chapters. Then the second chapter sheds light on the current experimental literature that addresses relevant behavioral biases and interventions in climate change. The review is narrative and provides a systematic overview of experimental literature strands, important lessons learned and central implications. The third chapter establishes a theoretical framework for studying climate change adaptation in an ambiguous setting and experimentally explores the effect that different levels of risk history have on risk perception and adaptation choices. The chapter stresses the importance of accounting for the way people perceive risk and uncertainty in the environment they face.

The fourth chapter presents a set of Climate Change Adaptation Applications based on oTree (CAT) that is tested for functionality and applicability in a laboratory experiment. CAT consists of discrete apps that correspond to different risk perception biases and corrective treatments. It can automate framed climate change experiments, as well as facilitate a dialogue in local communities.The fifth chapter improves external validity by using a simple oneshot version of CAT extended with a questionnaire suitable for a sample of Danish insurance policyholders who access it through an online portal. The questionnaire includes scales that help explore the psychometric determinants of climate change adaptation. The chapter provides evidence that individual characteristics can be of paramount importance for understanding differences in adaptation behavior. Finally, the conclusion recaps the thesis, reiterates the research questions, outlines the key findings and reflects on the implications as well as directions for future work.