My current research primarily focuses on two areas. First, I explore how behavioral economics can be integrated into developing effective environmental and energy policies. Second, I am interested in the theory and experimental evaluation of environmental policy. I am committed to translating these research insights into practical strategies that inform effective policy design. This page contains my current research.
Cheng, C., Wang, R., and Zhang, H. (2020). Surrogate Residuals for Discrete Choice Models. Journal of Computational and Graphical Statistics, 1-22.
(Job Market Paper)
Abstract: Misperceptions about others’ beliefs are widespread and affect individuals’ own beliefs and behaviors. On polarized issues, the effects of correcting these misperceptions may depend on political affiliation. I examine this using an online experiment on climate change beliefs in the United States, where attitudes are highly polarized. Using incentive-compatible methods, I elicit participants’ own beliefs and their beliefs about others’ beliefs (second-order beliefs). I then provide randomized information about others’ actual beliefs from either a co-partisan or an opposing partisan source, and observe their belief updating and pro-climate actions. The findings show that correcting misperceptions in second-order beliefs about climate change shifts individuals’ own beliefs and behaviors, and the effects depend on whether the individual and the information source are politically aligned. Stronger pro-climate beliefs from co-partisans increase individuals’ pro-climate beliefs and actions, while the same information from opposing partisans may generate backlash. These results suggest that uniform social information campaigns may have limited impact on polarized issues, and messages aligned with the audience’s political affiliation offer a more promising strategy for improving engagement.
Shining a Light on Risk: Risk Preferences and Adoption of Residential Solar PV (with Christine Crago and Rong Rong)
Under Review
Abstract: Individuals deciding whether to adopt green energy technology face significant financial risk, including technology underperformance, unexpected maintenance and repairs, and policy changes regarding state and federal incentives. These financial risks imply that individuals with a higher level of risk tolerance are more likely to adopt than risk averse individuals. Additionally, early adopters who face more volatile returns tend to be more risk-tolerant than late adopters. In this paper, we conduct a lab-in-the-field experiment to elicit individual risk preferences from solar PV adopters and non-adopters to examine the effect of risk preferences on the decision to adopt solar photovoltaic (PV) systems. Our findings confirm that risk preference has a significant impact on the adoption status and timing. Our findings suggest that reducing risk in policy design or through risk-mitigating insurance products can help to broaden solar PV adoption among households.
A Two-stage Conditional Commitment Mechanisms for Climate Cooperation (with Zhi Li and Pengfei Liu)
Under Review
Abstract: We introduce a conditional commitment mechanism (CCM) in a two-stage pledge process to improve the cooperation of the climate negotiations, motivated by the refund mechanism (money-back guarantee) in the threshold public goods games. Under the two-stage CCM, the first stage of pledges captures voluntary contributions with self-interests, and the second stage is framed as a threshold public goods game with refund, in which no actual contributions would be made unless the remaining endogenous threshold (gap) is reached given the first-stage voluntary pledges. We show that two-stage CCM improves climate cooperation in both homogeneous and heterogeneous induced value environments, leading to more emission reductions, higher provision rates and social efficiency in the lab experiment. Our results suggest CCM reduces the concern of high-cost sunk contributions and thus narrows the gap. Our results propose practical mechanisms to address free-riding in international climate change mitigation frameworks, such as Nationally Determined Contributions.
From Threat to Inoculation: How Aging Narratives Affect Mood and Decision-Making in Older Adults (with Xiaoxue Sherry Gao and Rebecca Ready)
Under Review
Abstract: We study the consequences of negative stereotypes about the cognitive and physical aspects of older adults on their moods, risk tolerance, and patience. In a randomized controlled experiment, participants are exposed to negative (stereotype threat), accurate (inoculation), and control information regarding their mental health. Participants’ moods are tracked throughout the experiments, and their risk tolerance and patience are measured using incentive-compatible procedures after exposure. Compared with the control group, we find no impact on participants’ moods due to exposure to negative information. However, when exposed to inoculation information, participants experience immediate positive changes in their moods and avoid the negative mood changes commonly experienced by participants in the control and stereotype threat groups. We find no changes in the average levels of risk tolerance or patience due to either treatment condition. However, regression analyses suggest more homogeneous risk tolerance and patience among participants exposed to inoculation information. In contrast, in the stereotype threat and control groups, risk tolerance and patience are associated with demographic characteristics, views on aging, and baseline moods. In summary, positive and accurate information regarding aging stabilizes mood, risk tolerance, and patience, indicating that inoculation campaigns on aging may be beneficial to public health.
Investment Incentives in Emissions Markets with Price Controls under Correlated Uncertainty (with John Stranlund)
Model completed; simulation work ongoing
Abstract: This paper examines firms' incentives to adopt a cost-saving abatement technology under an emissions market with both a hard price ceiling and a hard price floor (a price collar). A unique feature of our model is that we include correlated uncertainty in both the intercept and slope of firms’ marginal abatement cost functions. Our theoretical analysis shows that the effect of a price collar in emissions markets on adoption incentives depends on the correlation between uncertainties. When the price collar is centered on the expected price under the pure market, a small positive correlation improves adoption incentives; whereas a negative or a large positive correlation weakens it. We will complement our analysis with simulations to examine how correlated uncertainty in the intercept and slope affects technology adoption incentives over the full range of price collars. Current findings suggest that regulators should carefully account for the direction and magnitude of correlated uncertainties when designing hybrid policies to promote technology adoption and better emissions control.