Taco Prins (ASE, UvA): "Climate Optimism in the Market for Coastal Housing"

'Home equity is a significant part of homeowners’ wealth, so that flooding can cause homeowners to suffer large wealth losses. This risk is expected to rise due to climate change, including through sea level rise. However, neither future climate change nor its effect on the sea level are known precisely. Together with behavioural frictions, such as climate scepticism and inattention, this can cause anticipated and realised flood risk to diverge, even over a horizon of a few decades. Accordingly, many empirical studies have found coastal housing in certain locations to be overvalued, implying that possibly abrupt price corrections will have to occur.

This paper studies the economic implications of coastal house price overvaluation. In an established model of the housing market, we incorporate belief heterogeneity in the simplest possible way, by positing two types of households: one type which holds rational beliefs over future flood risk, consistent with the best available information, and another type which holds optimistic beliefs. In keeping with the empirical literature on the subject, we propose that repeated flood events eventually cause the disappearance of optimistic beliefs, and the alignment of both types' beliefs in the long run.

In our framework, optimistic beliefs inefficiently delay migration away from flood-prone areas. Further, flood events wipe out relatively more home equity, because the correction in coastal house values must be added to the physical destruction of capital. The channels are mutually reinforcing in their effect on the economic cost of sea level rise.

Sezin Ekinci (ABS, UvA): "Plant-Based Defaults as Brand Activism: The Role of Injunctive Norms and Anger in Brand Attitudes"

Reducing global meat consumption is critical to addressing the climate crisis, yet it remains a challenging behavior to shift. While brands can play an important role in advocating for social change through activism, they often hesitate due to the risk of backlash. We explore plant-based (PB) defaults as a form of brand activism that encourages the reduction of meat consumption while potentially minimizing backlash. Across three preregistered studies with U.S. meat-eaters (N=1,472), we find that PB defaults significantly increase PB food choices but simultaneously lead to lower brand attitudes compared to no-default conditions. We identify injunctive norms and anger as key psychological mechanisms explaining this effect: PB defaults heighten perceptions of social pressure, which trigger anger and, in turn, reduce brand attitudes. As a next step, we aim to test interventions to repair brand attitudes. Our research highlights the unintended consequences of PB defaults on brand perceptions and offers insights for brands seeking to support the reduction of meat consumption while maintaining positive consumer responses.