Alberto Salvo, National University of Singapore

Environment-Enhanced Momentum and Demand for Environmental Quality
Tuesday, 24 September 2019 - 11:30 am to 1:00 pm
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Contact person: 
Anthony Heyes
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Cost to attend: 
Free of charge
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CRC Seminars in Environmental/Pubic Economics

We develop a dynamic contest model to investigate how environmental factors shift worker incentives, effort, and transitions in equilibrium. The theory predicts that an adverse environment enhances the momentum of an early win and shows how the demand for environmental amenities can be inferred from dynamic behavior. We test and apply our theory to high-profile tennis matches in Australia and China and find that heat and pollution enhance strategic momentum. Relative to cooler and cleaner environments, an elite worker's disutility from an additional battle at temperatures above 27 Celsius is $4,000; the disutility from a battle at PM2.5 levels above 200 ug/m3 is $12,000. Our structural approach links contest theory to environmental valuation and is amenable to quantifying agents' disutility from adverse environmental shocks more broadly.