a method for the correction of the feed in tariff price for cogeneration based on a comparison between croatia and eu member states the european commission has adopted directive 2004 8 ec on the promotion of cogeneration which the eu member states as well as candidates including croatia were obliged to accept among other terms and conditions the directive requires certain support mechanisms such as feed in tariff prices and premiums added to market electricity prices in this paper the cost effectiveness of selling electricity at the feed in tariff prices in the selected eu member states is compared to selling it on the european electricity market with or without premiums the results of this comparison will indicate whether correction of the croatian feed in tariff price to a higher value would be justified the cost effectiveness ratio of a cogeneration unit upgraded with mean reverting and jump diffusion processes is used for comparison at the end of this paper a method is suggested for the correction of feed in tariff prices with examples of corrected prices for the years 2008 and 2009 such corrections have been proven to be justified and are compared to the feed in tariff prices in most of the selected eu member states

risk based analysis and policy implications for renewable energy investments in greece significant renewable energy re investments have to be implemented in order to achieve the ambitious re targets set in the eu for 2020 and beyond moreover a great amount of capital has to be leveraged as these projects are followed by high investment and financing costs main aim of this paper is the provision of a comprehensive assessment of the existing risk elements of re investments in relation to the respective policies and the evaluation of their impact on the weighted average cost of capital wacc in greece a consultation procedure with key national energy stakeholders took also place including policy makers project developers investors equity providers bankers and energy analysts in the greek re market in order to provide a validation of the respective results it has been concluded that the policy design risk represents the risk element with the greatest impact on the cost of capital and thus the level of re investments deployment ased on the cost of capital valuation process followed the wacc was estimated to reach approximately 12 for onshore wind and little lower values for solar pv projects in greece

a land of milk and honey with streets paved with gold do emigrants have over optimistic expectations about incomes abroad millions of people emigrate every year in search of better economic and social opportunities anecdotal evidence suggests that emigrants may have over optimistic expectations about the incomes they can earn abroad resulting in excessive migration pressure and in disappointment among those who do migrate yet there is almost no statistical evidence on how accurately these emigrants predict the incomes that they will earn working abroad in this paper the authors combine a natural emigration experiment with unique survey data on would be emigrants probabilistic expectations about employment and incomes in the migration destination their procedure enables them to obtain moments and quantiles of the subjective distribution of expected earnings in the destination country the authors find a significant underestimation of both unconditional and conditional labor earnings at all points in the distribution this underestimation appears driven in part by potential migrants placing too much weight on the negative employment experiences of some migrants and by inaccurate information flows from extended family who may be trying to moderate remittance demands by understating incomes

why the marriage squeeze cannot cause dowry inflation an influential explanation for rising dowry payments is the marriage squeeze the present paper shows this explanation to be internally inconsistent the marriage squeeze argument for inflation relies on the fact that population growth leads to an excess supply of brides in the marriage market this excess supply is resolved by some women postponing marriage so that the average age of brides increases in previous studies the argument is stated informally here a matching model of marriage is developed to formally analyze the link between dowry payments and population growth it is shown that a marriage squeeze cannot yield dowry inflation in fact when women who do not find matches at the desirable marrying age re enter the marriage market as older brides a marriage squeeze is shown to imply dowry deflation population change is therefore not a promising explanation for the observed increases in dowry payments

group lending repayment incentives and social collateral abstract in this paper we investigate the impact on repayment rates of lending to groups which are made jointly liable for repayment this type of scheme especially in the guise of the grameen bank in bangladesh has received increasing attention we set up and analyze the repayment game which group lending gives rise to our analysis suggests that such schemes have both positive and negative effects on repayment rates the positive effect is that successful group members may have an incentive to repay the loans of group members whose projects have yielded insufficient return to make repayment worthwhile the negative effect arises when the whole group defaults even when some members would have repaid under individual lending we also show how group lending may harness social collateral which serves to mitigate its negative effect

the perceived returns to education and the demand for schooling economists emphasize the link between market returns to education and investments in schooling though many studies estimate these returns with earnings data it is the perceived returns that affect schooling decisions and these perceptions may be inaccurate using survey data for eighth grade boys in the dominican republic we find that the perceived returns to secondary school are extremely low despite high measured returns students at randomly selected schools given information on the higher measured returns completed on average 0 20 0 35 more years of school over the next four years than those who were not

women s schooling home teaching and economic growth the hypothesis that increases in the schooling of women enhance the human capital of the next generation and thus make a unique contribution to economic growth is assessed on the basis of data describing green revolution india estimates are obtained that indicate that a component of the significant and positive relationship between maternal literacy and child schooling in the indian setting reflects the productivity effect of home teaching and that the existence of this effect combined with the increase in returns to schooling for men importantly underlies the expansion of female literary following the onset of the green revolution

comparing feed in tariff incentives in taiwan and germany abstract the current development of clean energy in taiwan is in the embryonic stage even though in recent times taiwan s development of renewable energy has emphasized wind power and photovoltaic power current statistics show they supply only a small portion of total national power needs and that wind power and solar power are still in development in order to promote the growth of clean energy it is necessary to compare the support mechanisms of developing clean energy in different countries the success of implementing clear energy in germany is often followed by other countries including taiwan thus this paper explores the german experience of implementing a feed in tariff hereafter fit and compared it with the fit system in taiwan to illustrate the differences and similarities between these countries the results could be used as a reference for the future modification of the fit system in taiwan

preferences for proxy attributes a proxy attribute is an indirect measure of an ultimate decision objective keeney and raiffa keeney r l h raiffa 1976 decisions with multiple objectives preferences and value tradeoffs john wiley new york argued that assessing utility functions over proxy attributes requires complex inferences that may exceed the human capacity for consistent judgment thus biasing utility assessments this hypothesis was tested in an experimental study of preferences for pollution control alternatives each decision maker made two sets of utility assessments the first regarding outcomes described by the fundamental attributes pollution control cost and pollution related illness the second regarding outcomes described by the fundamental attribute pollution control cost and the proxy attribute pollution emissions level which served as an indirect measure of illness the subjects displayed a near universal bias to overweight the proxy attribute relative to the prescriptions of expected utility theory the bias was large resulting in a substantial loss of expected utility in a simulated policy decision making scenario to account for this bias we developed three heuristic models of preferences for proxy attributes the best guess worst case and relative importance models the results strongly favored the relative importance model according to which decision makers assess scaling constants by relying on general attitudes regarding the relative importance of different decision objectives rather than on well articulated preferences for rates of substitution between pairs of attributes

betting your favorite to win costly reluctance to hedge desired outcomes we examined whether people reduce the impact of negative outcomes through emotional hedging betting against the occurrence of desired outcomes we found substantial reluctance to bet against the success of preferred u s presidential candidates and major league baseball national football league national collegiate athletic association ncaa basketball and ncaa hockey teams this reluctance was not attributable to optimism or a general aversion to hedging reluctance to hedge desired outcomes stemmed from identity signaling a desire to preserve an important aspect of the bettor s identity reluctance to hedge occurred when the diagnostic cost of the negative self signal that hedging would produce outweighed the pecuniary rewards associated with hedging participants readily accepted hedges and pure gambles with no diagnostic costs they also more readily accepted hedges with diagnostic costs when the pecuniary rewards associated with those hedges were greater reluctance to hedge identity relevant out

measuring subjective expectations in developing countries a critical review and new evidence the majority of economic decisions taken by individuals are forward looking and thus involve their expectations of future outcomes understanding the expectations that individuals have is thus of crucial importance to designing and evaluating policies in health education finance migration social protection and many other areas however the majority of developing country surveys are static in nature and do not contain information on the subjective expectations of individuals possible reasons given for not collecting this information include fears that poor illiterate individuals do not understand probability concepts that it takes far too much time to ask such questions or that the answers add little value this paper provides a critical review and new analysis of subjective expectations data from developing countries and refutes each of these concerns the authors find that people in developing countries can generally understand and answer probabilistic questions such questions are not prohibitive in time to ask and the expectations are useful predictors of future behavior and economic decisions the paper discusses the different methods being tried for eliciting such information the key methodological issues involved and the open research questions the available evidence suggests that collecting expectations data is both feasible and valuable suggesting that it should be incorporated into more developing country surveys

why dowry payments declined with modernization in europe but are rising in india in contrast to most dowry oriented societies in which payments have declined with modernization those in india have undergone significant inflation over the last five decades this paper explains the difference between these two experiences by focusing on the role played by caste the theoretical model contrasts caste and non caste based societies in the former there exists an inherited component to status caste that is independent of wealth and in the latter wealth is the primary determinant of status modernization is assumed to involve two components increasing average wealth and increasing wealth dispersion within status or caste groups the paper shows that in caste based societies the increases in wealth dispersion that accompany modernization necessarily lead to increases in dowry payments whereas in non caste based societies increased dispersion has no real effect on dowry payments and increasing average wealth causes the payments to decline

education choices and returns on the labor and marriage markets evidence from data on subjective expectations in this paper we analyze the role of expected labor and marriage market returns as determinants of the college enrollment decisions of mexican high school graduates moreover we investigate whether the relative weights of these factors differ by gender we use data on individuals expectations regarding future labor market outcomes which we directly elicited from the youths and two different measures of marriage market returns first marriage market returns are proxied by the net supply of potential partners in the youths local marriage markets second we use data which elicits youths beliefs about their future spouse s earnings conditional on their own education level we find that labor market as well as marriage market returns are important determinants of the college enrollment decision however boys and girls preferences differ in terms of the relative role of the two determinants in that the relative weight of labor market versus marriage market returns is larger for boys than for girls

empowering women inheritance rights female education and dowry payments in india this paper examines the impact of gender progressive reforms to the inheritance law in india on women s outcomes despite stipulating that daughters would have equal shares as sons in ancestral property i find that the reform failed to increase the actual likelihood of women inheriting property instead parents appear to be gifting their share of land to their sons in order to circumvent the law however parents also appear to be compensating their daughters for such disinheritance by giving them alternative transfers in the form of either higher dowries or more education following the reform

up close and personal investor sophistication and the disposition effect this paper analyzes the trading records of a major discount brokerage house to investigate the disposition effect the tendency to sell stocks that have appreciated in price winners sooner than stocks that trade below the purchase price losers in contrast to previous research that has demonstrated the disposition effect by aggregating across investors our main objective is to identify differences in the disposition bias across individuals and explain this in terms of underlying investor characteristics building on the findings in experimental economics and social psychology we hypothesize that differences in investor literacy about financial markets and trading frequency are responsible in part for the variation in individual disposition effect using demographic and socioeconomic variables as proxies for investor literacy we find empirical evidence that wealthier individuals and individuals employed in professional occupations exhibit a lower disposition effect consistent with experimental economics trading frequency also tends to reduce the disposition effect we provide guidelines for investment advisors regulators and investment communities to utilize our findings and help investors make better decisions

the u s investment tax credit for solar energy alternatives to the anticipated 2017 step down abstract solar photovoltaic pv installations in the united states have been deployed at a rapid pace in recent years a development that is attributed in significant part to the federal investment tax credit itc yet this credit is scheduled to step down from 30 to 10 at the beginning of 2017 for corporate investors for a sample of five u s states and different segments of the solar industry we find that the anticipated itc step down in 2017 would increase the levelized cost of solar power by a significant margin raising the specter of a cliff for the solar industry our analysis identifies and evaluates an alternative phase down scenario that would reduce the itc gradually over time and eliminate it completely by 2024 for this alternative phase down scenario it is shown that solar pv would remain broadly competitive provided the solar industry can maintain the pace of cost reductions demonstrated in past years

assessment of the feed in tariff mechanism for renewable energies in taiwan abstract due to taiwan s lack of natural resources dependence on imported energy and pursuit of sustainable development renewable energies are extremely important for taiwan s future energy supply since taiwan s feed in tariff fit is still in its initial stage one must examine whether the current system is compatible with a well designed fit scheme this study examines the main features of taiwan s fit system and assesses design options using several criteria additionally one of the most important elements of a fit scheme namely a tariff system is discussed taiwan s fit scheme has the design options required by well functioning fits and the guaranteed return tariff system coincides with the spirit underlying leading global fits however many issues such as setting goals by stages refinement of the tariff calculation methodology and elimination of other non economic barriers must be addressed to achieve future developmental goals and green industry growth

fixed feed in tariff versus premium a review of the current spanish system a b s t r a c t since 1998 the spanish government established a feed in system where res e generators could choose between two alternatives fixed feed in tariff and premium nowadays all res e 1 can be sold in the electricity market getting an additional premium except for solar photovoltaic one important novelty established in 2007 is a cap and floor system for facilities under the premium option the aim of this paper is to analyze and compare these two alternative options fixed fit and premiums which coexist at the same time in spain describe the evolution of both systems and evaluate its performance the introduction of this support system in spain led to very good results in terms of res e deployment the main advantage of the premium option is that it is a scheme integrated in the electricity market one disadvantage is that it can occasionally lead to overcompensation one way to try to avoid it is to set a cap value in order to evaluate the performance of this dual support system not only res e deployment has been assessed but also the policy stability the adequacy of res e production to the electricity demand pattern and the changes in the investors behaviour

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

the rising price of husbands a hedonic analysis of dowry increases in rural india dowries in south asia have steadily risen over the last 40 years and now often amount to over 50 percent of a household s assets this paper attempts to investigate the reasons behind this increase it adapts rosen s implicit market model to the indian marriage market and tests predictions from the model with data from six villages in south central india and from the indian census it is found that a marriage squeeze caused by population growth resulting in larger younger cohorts and hence a surplus of women in the marriage market has played a significant role in the rise in dowries

multiattribute risky choice behavior the editing of complex prospects this investigation draws upon concepts from prospect theory kahneman and tversky kahneman d a tversky 1979 prospect theory an analysis of decisions under risk econometrica 47 263 291 and multiattribute utility theory keeney and raiffa keeney r l h raiffa 1976 decisions with multiple objectives preferences and value tradeoffs wiley new york in an examination of the multiattribute risky choice behavior of 128 managers the questions of how managers edit multiattribute prospects and how editing relates to various independence assumptions were explored the major result is that managers appear to violate attribute independence in its general form and especially in the form of the marginality assumption the most common form of behavior observed was multiattribute risk aversion for prospects involving only gains and multiattribute risk seeking for prospects involving only losses this result reinforces the importance of a target reference point or aspiration level that has been f

muslim family law prenuptial agreements and the emergence of dowry in bangladesh we explain trends in dowry levels in bangladesh by drawing attention to an institutional feature of marriage contracts previously ignored in the literature the mehr or traditional islamic brideprice we develop a model of marriage contracts in which mehr serves as a barrier to husbands exiting marriage and a component of dowry as an amount that ex ante compensates the groom for the cost of mehr we investigate how mehr and dowry respond to exogenous changes in the costs of polygamy and divorce and show that our model gives a dierent set of predictions than traditional models we show that major changes in dowry levels took place precisely after the legal changes corresponding to simultaneous changes in levels of mehr

risk preferences for gains and losses in multiple objective decision making payne laughhunn and crum payne j w d j laughhunn r crum 1984 an experimental study of multiattribute risky choice management sci 30 1350 1361 found that managers were multiattribute risk averse for gains but multiattribute risk prone for losses a pattern that is inconsistent with both the additive and the multiplicative multiattribute utility models in this paper we develop the reference risk value rrv model which is simple in structure yet capable of representing the kinds of multiattribute reference effects observed by payne et al we also report the results of two experiments that compare the descriptive validity of the rrv model with that of the additive and multiplicative utility models experiment 1 involved choices between risky multiperiod cash flows experiment 2 choices between risky job alternatives described by change in salary and change in type of work in experiment 1 subjects were multiattribute risk averse for gains but multiattribute risk neutral for losses in e

allocation of tasks for reliability growth using multi attribute utility abstract in reliability growth models in particular and project risk management more generally improving the reliability of a system or product is limited by constraints on cost and time there are many possible tasks which can be carried out to identify and design out weaknesses in the system under development this paper considers the allocation problem which subset of tasks to undertake while the method is applicable to project risk management generally the work has been motivated by reliability growth programmes we utilise a model for reliability growth based on an efficacy matrix developed with engineering experts in the aerospace industry we develop a general multi attribute utility function based on targets for cost time on test and system reliability the optimal subset is identified by maximising the prior expected utility we derive conditions on the model parameters for risk aversion and loss aversion based on observed properties of preference we give conditions for multivariate risk aversion under the general form of the utility function the method is illustrated using an example informed by work with aerospace organisations

daughters dowries deliveries the effect of marital payments on fertility choices in india abstract this paper investigates the effect of the differential pecuniary costs of sons and daughters on fertility decisions the focus is on dowries in india which increase the economic returns to sons and decrease the returns to daughters the paper exploits an exogenous shift in the cost of girls relative to boys arising from a revision in anti dowry law which is shown to have decreased dowry transfers markedly the reform is found to have attenuated the widely documented positive association between daughters and their parents fertility the effect is particularly pronounced for more autonomous women and for individuals living in areas characterised by strong preferences for sons

what s your child worth an analysis of expected dowry payments in rural india abstract this paper introduces a new primary dataset on dowry payments in rural india a novel feature of the data is that in addition to eliciting actual dowry payments we also asked rural indian households how much dowry they expected to pay receive for each of their currently unmarried children these expectations are presumably the basis of household decision making as opposed to actual dowries paid and received with respect to decisions such as human capital investments saving and consumption etc we find that the distribution of dowry forecasts appears to be consistent with the distribution of actual dowry payments suggesting that dowry perceptions may be quite accurate our analysis of dowry forecasts further indicates that i individual specific attributes are significantly more important than household income and wealth in terms of explaining the magnitude of dowry payments and ii bride quality is also a significant determinant of dowry which provides a corrective to the emphasis on groom quality in the literature

microeconomic approaches to development schooling learning and growth within the field of economic development over the past 15 years or so particularly significant advances have been made in what can be loosely called micro development an area defined principally by the units that are examined not by a particular methodological approach the units may be indi viduals households networks banks government agencies and so on as opposed to countries within this area economists use a wide variety of empirical methods informed to different degrees by economic models they use data from developed and

feed in tariff promotion and innovative measures for renewable electricity taiwan case analysis abstract taiwan located in a subtropical area is a high energy importing nation with approximately 98 of our energy supplied by imported fuels since 2000 in this regard renewable electricity systems from its richness of solar radiation and strong monsoon are thus becoming attractive due to the energy economic and environmental policies for pursuing clean electricity supply sustainable development and greenhouse gases emission mitigation in taiwan the objective of this paper was to present an analysis of profitable promotion and innovative measures for renewable electricity in taiwan because the photovoltaic pv power and wind power systems have rapidly increased the total installed capacity from 2 7 mw in 2000 to 1006 2 mw in 2013 the description in the paper was thus summarized on an analysis of renewable electricity supply since 2000 and its future goals up to 2030 and then centered on the new promotion legislation i e renewable energy development act in the measures of feed in tariff fit and tax subsidy incentives current subsidiary and innovative programs to promote the development of renewable electricity technologies including roof type pv power off shore wind power and biogas to power were also described due to its innovation promotion for renewable energy exploitation in recent years pingtung county located in the southernmost of taiwan was introduced as a case study finally some recommendations for promote renewable electricity development were addressed in the paper

competing premarital investments this paper studies premarital parental investments in children s wealth where spousal wealth is a public good in marriage by investing in their children s wealth parents increase the wealth of their children and the quality of the spouses that their children can marry in large marriage markets the hedonic return to investment internalizes all the external benefits of premarital investment in wealth so that the competitive equilibrium is efficient marriage market competition also increases investments in small marriage markets relative to no competition but equilibrium investments are not efficient

retail electricity tariff and mechanism design to incentivize distributed renewable generation abstract this paper examines the question of how to incentivize the adoption and use of renewable energy resources with particular attention on distributed renewable energy dre prior experience suggests that price and quantity based programs such as feed in tariffs provide more efficient renewable adoption and use and lower program costs than programs that set quantity targets only we also examine some cost allocation issues raised by the use of dre systems and fixed time invariant retail pricing this combination can result in customers with dre systems paying a disproportionately small portion of system capacity costs we suggest two retail pricing schemes real time pricing and a two part tariff with demand charges to address these issues

note further tests of aspiration level effects in risky choice behavior this note extends the work reported in payne laughhunn and crum payne j w d j laughhunn r crum 1980 translation of gambles and aspiration level effects in risky choice behavior management sci 26 1039 1060 on the need to incorporate a target return reference point or aspiration level concept in the analysis of risky choice behavior two experiments are reported the first experiment provides a more complete test of the model of reference point effects developed by payne laughhunn and crum a translation of outcomes procedure which adds a constant to all outcomes was used to vary the relationship of pairs of gambles to an assumed target or reference point the results fully support the model the second experiment provides evidence of the conceptual validity of the model by using explicit instructions to vary the target levels of managers while holding gamble values constant

comparing the feed in tariff incentives for renewable electricity in ontario and germany the development of feed in tariff fit programs to support green electricity in ontario the green energy and green economy act of 2009 and germany the erneuerbare energien gesetz of 2000 is compared the two policies are highly comparable offering similar rates for most renewable electricity technologies major differences between the policies include the level of differentiation found in the german policy as well as the use of a price degression strategy for fit rates in germany compared to an escalation strategy in ontario the german renewable electricity portfolio is relatively balanced compared to ontario where wind power dominates the portfolio at the federal level canada does not yet have a policy similar to the european directive on renewable energy and this lack may impact decisions taken by manufacturers of renewable technologies who consider establishing operations in the province ontario s green energy and green economy act could be benefit from lessons in the german system especially with regard to degression of feed in tariff rates over time which could significantly reduce payments to producers over the course of a contract and in turn encourage greater competitiveness among renewable power providers in the future

gender productive ability and the perceived returns to education evidence from rural india recent research has established the importance of perceived as opposed to actual returns as a determinant of educational investments we analyze data from india to highlight gender disparities in the perceived returns to education and the salience of productive characteristics

the economics of dowry and brideprice payments between families at the time of marriage existed during the history of most developed countries and are currently pervasive in many areas of the developing world these payments can be substantial enough to affect the welfare of women and a society s distribution of wealth recent estimates document transfers per marriage amounting to six times the annual household income in south asia rao 1993 and four times in sub saharan africa dekker and hoogeveen 2002 this paper first establishes some basic facts about the prevalence and magnitude of marriage payments it then discusses how such patterns vary across countries depending upon economic conditions societal structures institutions and family characteristics such payments have also evolved within societies over time for example in some periods such payments have risen sharply in some cases payments have shifted from the grooms sides to the brides and vice versa also property rights over such payments have sometimes shifted between marrying partners and parental generations economists who have only recently begun to work on the topic have focused on explaining these facts the second part of the paper addresses this economic literature though considerable insight into many of the facts has been gained many of the existing economic explanations are weakly convincing and many puzzles remain one crucial difficulty is that solid data in this field have been extremely rare the descriptions of marriage payments in this paper are synthesized from a patchwork of studies across periods places and even epochs and there are doubtless numerous cases which remain undocumented thus the paper

the economics of consanguineous marriages the institution of consanguineous marriage a marriage contracted between close biological relatives has been a basic building block of many societies in different parts of the world this paper argues that the practice of consanguinity is closely related to the practice of dowry and that both arise in response to an agency problem between the families of a bride and a groom when marriage contracts are incomplete dowries transfer control rights to the party with the highest incentives to invest in a marriage when these transactions are costly however consanguinity can be a more appropriate response since it directly reduces the agency cost the paper s model predicts that dowry transfers are less likely to be observed in consanguineous unions it also emphasizes the effect of credit constraints on the relative prevalence of dowry payment and consanguinity an empirical analysis using data from bangladesh delivers robust results consistent with the predictions of the model

consumption smoothing migration and marriage evidence from rural india a significant proportion of migration in low income countries particularly in rural areas is composed of moves by women for the purpose of marriage we seek to explain these mobility patterns by examining marital arrangements among indian households in particular we hypothesize that the marriage of daughters to locationally distant dispersed yet kinship related households is a manifestation of implicit interhousehold contractual arrangements aimed at mitigating income risks and facilitating consumption smoothing in an environment characterized by information costs and spatially covariant risks analysis of longitudinal south indian village data lends support to the hypothesis marriage cum migration contributes significantly to a reduction in the variability of household food consumption farm households afflicted with more variable profits tend to engage in longer distance marriage cum migration the hypothesized and observed marriage cum migration patterns are in dissonance with standard models of marriage or migration that are concerned primarily with search costs and static income gains

the cost of simplifying preference models formulas are derived which estimate the accuracy of conjoint analysis in predicting preferences in a validation sample this accuracy turns out to depend on among other things which model of preference is used e g whether interactions are added whether partworth or linear functions are used i first show a paradoxical result that simpler models often yield higher predictive accuracy even when a more complex model is the true one the reason for this is that the additional parameters of the complex model are estimated with larger variance which tends to overwhelm the benefits of using the true model i then shift my criterion from predicting an individual s preferences to predicting market share which is of most interest to managers under this criterion my conclusions reverse and i show that a true model even when complex is much more likely to yield higher predictive accuracy than a simpler incorrect model this reverses some previous conclusions in marketing and confirms that finding the