Impact of risk perception on intrapersonal heterogeneity in decision-making processes by air pollution context: A latent variable and latent class regret-utility approach

Public preferences and needs are crucial for the effective implementation of air pollution treatment policies. Homogeneous decision-making processes assumption is limited in exploring public preferences and welfare estimates in the context of heterogeneous respondents. Behavioral economics have developed a hybrid set of decision rules to address this issue, but the internal factors contributing to public heterogeneous choices behavior remain unknown. This study aims to explore the hidden motivations, particularly risk perception, that contribute to intrapersonal heterogeneity in decision-making regarding an air pollution treatment project by a latent variable and latent class regret-utility approach. Results indicate that risk perception is a determinant factor causing intrapersonal heterogeneity of public's decision-making process of air pollution treatment programs. Respondents with higher risk controllability tend to employ a fully rational decision rule (utility maximization) and reduce heavily polluted days, whereas those who are more susceptible to risk prefer to adopt a bounded rational decision rule (regret minimization), increase the clean air days ratio and shorten the years of policy delay. Furthermore, considering risk perception, the probability of respondents being regret-driven increases from 57.20% to 61.36%, and the willingness to pay of respondents for air pollution treatment measures evidently decreases. These findings shed light on the motivations and barriers behind public action and help tailor approaches for specific groups to achieve sustainable environmental management.