when do losses loom larger than gains abstract in defining limits to loss aversion novemsky and kahneman 2005 offer important new data and a needed summary of appropriate ways to think about loss aversion in this comment to novemsky and kahneman s article the authors consider the new empirical results that involve probabilistic buying and selling suggesting caution in generalizing the results to nonprobabilistic commerce the authors expand novemsky and kahneman s summary by exploring two critical constructs that help define the boundaries of loss aversion emotional attachment and cognitive perspective emotional attachment alters loss aversion by moderating the degree to which parting with an item involves a loss whereas shifts in cognitive perspective explain why items typically viewed as a loss are given more or less weight the goal is to use these constructs to characterize more specifically contexts in which losses loom larger than gains and to suggest specific ways that research into loss aversion could evolve

the effects of induced mood on bidding in random nth price auctions we investigate the effects of mood on decisions in random nth price auctions there are two possible ways in which mood can affect behavior 1 mood can affect the valuation of the object being auctioned or the willingness to pay wtp and 2 mood can affect the bidding behavior itself to identify these two possible effects we study decisions with induced values and with homegrown values our data show that positive mood generates an upward bidding bias in the induced value condition however only under certain conditions do we observe weak mood effects on wtp

household choices and child development the growth in labor market participation among women with young children has raised concerns about the potential negative impact of the mother s absence from home on child outcomes recent data show that mother s time spent with children has declined in the last decade while the indicators of children s cognitive and noncognitive outcomes have worsened the objective of our research is to estimate a model of the cognitive development process of children nested within an otherwise standard model of household life cycle behavior the model generates endogenous dynamic interrelationships between the child quality and employment processes in the household which are found to be consistent with patterns observed in the data the estimated model is used to explore the eects of schooling subsidies and employment restrictions on household welfare and child development

a dynamic explanation of the willingness to pay and willingness to accept disparity a fundamental tenet in neoclassical theory is the basic independence assumption an individual s preferences are assumed to be measured over levels not changes although most theoretical and applied economic models invoke this assumption a wealth of data from laboratory experiments refutes this premise as systemic empirical disparities have been observed between willingness to pay wtp and willingness to accept wta for the same good e g kahneman knetsch and thaler 1990 with wta often observed to be many times larger than wta in an influential line of work hanemann 1991 argues that the large wta wtp disparities that have been observed in the literature can be reconciled with static neoclassical theory via income and substitution effects i but the empirical evidence to date has not conformed well to hanemann s 1991 or any other neoclassical based model 2 if the observed value disparity is inconsistent with neoclassical explanations and is found to be a fundamental component of individual s preferences as per reference dependent theory kahneman and tversky 1979 tversky and kahneman 1991 then a reevaluation of a good deal of economic analysis is necessary in this article we provide a different explanation for the wta wtp disparity a dynamic theory based on the presence of commitment costs and possibly asymmetric beliefs about market opportunities when the value of a good is uncertain wtp and wta will logically reflect compensation for the possibility of learning that the good has a different value than believed at the time of purchase or sale and the cost associated with reversing the purchase or sale decision in its simplest form our model predicts that with objective symmetric beliefs about market opportunities and with perfect substitutability and no income effects there should be no value disparity intuitively the objective cost of delaying the purchase or alternatively reversing the purchase for prospective buyers is isomorphic to the objective cost of reversing or delaying the sale for prospective sellers this symmetry necessarily leads to wta wtp consistent with the neoclassical paradigm importantly however it is an agent s perception of the delay and reversal costs that motivates behavior if agents behave in a manner consistent with the developing literature on cognitive dissonance and or limited memory it is quite plausible for individuals to display an asymmetric perception of the relative costs of selling later depending upon whether they are placed in the role of a buyer or seller 3 this type of asymmetry alone can yield the systematic value divergences observed in the literature indeed we show that even with only slight asymmetries in beliefs of perceived costs our theory can generate considerable value divergences because the actual divergence will depend upon the interaction of this asymmetry with the degree of value uncertainty time preference and lost value of consumption we explore the predictive power of our theory by examining wta and wtp statements of value from consumers in a competitive marketplace the sportscard market although we do not consider the sportscard marketplace particularly worthy of study in its own right it is useful for our purposes for several reasons first it is a natural setting for an examination of preference structures because it provides a rich pool of subjects making decisions in a familiar environment with uncertainty and future learning about the values of traded goods second we can identify factors that arise endogenously such as market experience and impose the remaining controls necessary to implement a clean experiment to explore whether such factors attenuate the value disparity through the channels predicted by our theory our data are striking in that agents display an asymmetric perception of the relative costs of selling later depending upon whether they are placed in the role of a buyer or seller

licensing effect in consumer choice abstract most choices in the real world follow other choices or judgments the authors show that a prior choice which activates and boosts a positive self concept subsequently licenses the choice of a more self indulgent option the authors propose that licensing can operate by committing to a virtuous act in a preceding choice which reduces negative self attributions associated with the purchase of relative luxuries five studies demonstrate the proposed licensing effect of a prior commitment to a virtuous act on subsequent choice consistent with the authors theory the preference for an indulgent option diminishes if the licensing task is attributed to an external motivation the authors also report a mediation analysis in support of their theoretical explanation that the licensing effect operates by providing a temporary boost in the relevant self concept

estimating the public good value of preserving a local historic landmark the role of non substitutability and citizen information this study applies stated preference methods to estimate the public good values of preservation and restoration of a local historic landmark in a medium sized us city the survey device centres on

understanding social capital in recently restructured urban neighbourhoods two case studies in rotterdam in the major dutch cities social rented housing in post war neighbourhoods has been demolished and largely replaced by more expensive owner occupied and rental housing through residential mobility these measures can trigger substantial population changes this paper studies residents social capital in two recently restructured neighbourhoods in the city of rotterdam it distinguishes between the stayers movers and newcomers in a neighbourhood context social capital refers to the benefit of cursory interactions shared norms trust and collective action of residents survey data show that social capital is not only an asset of long term stayers but that in particular newcomers are relatively rich in social capital factors associated with higher levels of social capital are a higher net income presence of households with children stronger place attachment higher perceived neighbourhood quality homeownership and single family dwellings the expected future length of residence in the area appears

safe and satisfied external effects of homeownership in rotterdam the article analyses the impact of homeownership on neighbourhood safety and neighbourhood satisfaction using a unique panel dataset for the city of rotterdam the results show that there are significant but economically small effects of homeownership on safety and satisfaction moreover the relation between ownership and satisfaction is significantly moderated by neighbourhood safety the paper examines whether the marginal impact of increases in homeownership on external effects diminish once ownership levels are higher according to the data this seems to be the case the results are robust to alternative specifications the findings provide insights for the evaluation of housing market policies that subsidise or stimulate homeownership

moral dimensions of the wta wtp disparity an experimental examination abstract contrary to welfare economic theory empirical evidence suggests that the amount of money people are willing to accept wta to forego a commodity will generally exceed the amount of money they are willing to pay wtp to gain the commodity this paper undertakes an experimental examination of the wta wtp disparity using conventional and ecologically produced eggs the results of this experiment reveal that the difference between the mean wtp and wta for conventional eggs is negligible while the mean wta is more than 1 5 times higher than the mean wtp in the case of ecological eggs an explanation for this result is offered following the boyce et al boyce r b brown t c mcclelland g h peterson g l schulze w d 1992 an experimental examination of intrinsic values as a source of the wta wtp disparity am econ rev 82 1366 1373 notion that an asymmetrical assignment of moral responsibility may cause wta to exceed wtp by comparing the two studies a tentative conclusion is that the valuation disparity is likely to increase with a corresponding increase in the degree of assigned moral responsibility

price framing effects on the purchase of hedonic and utilitarian bundles abstract marketers are increasingly offering bundles that combine cross category seemingly unrelated items this article examines the conditions under which framing a discount as savings on certain items of cross category bundles is more effective for increasing bundle purchase three experiments show that the purchase of a cross category bundle is more likely when the discount is framed as savings on the relatively hedonic component rather than as savings on the utilitarian component or on the total bundle the authors explain the findings based on the notion that a discount provides a justification that increases the likelihood of hedonic purchases but has little impact on utilitarian consumption the article concludes with a discussion of managerial implications of the findings

revealing preferences for leisure time from stated preference data when consumer choice is constrained by time as well as money willingness to pay can be defined with respect to either numeraire the two measures can be related formally within a utility consistent model of choice subject to two constraints furthermore when information is collected on both the respondent s marginal value of time can be identified a system of willingness to pay time and money and the marginal value of leisure time is estimated jointly in an application to california whalewatching and whale stock enhancement the empirical approach can be applied with only minor additions to survey techniques for nonmarket valuation

lagged beliefs and reference dependent utility abstract models of expectation based reference dependent preferences proposes that the reference point to which consumption outcomes are compared is endogenously determined as a function of lagged probabilistic beliefs this paper presents an experiment designed to test some predictions of expectation based reference dependence models the design induces a stochastic reference point via a lottery and then measures valuations for a commodity the experimental results find no effect of the first stage lottery on commodity valuation

a test of the theory of reference dependent preferences eight alternative methods of eliciting preferences between money and a consumption good are identified two of these are standard willingness to accept and willingness to pay measures these methods differ with respect to the reference point used and the dimension in which responses are expressed the loss aversion hypothesis of tversky and kahneman s theory of reference dependent preferences predicts systematic differences between the preferences elicited by these methods these predictions are tested by eliciting individuals preferences for two private consumption goods the experimental design is incentive compatible and controls for income and substitution effects the theory s predictions are broadly confirmed

on the psychology of loss aversion possession valence and reversals of the endowment effect loss aversion states that losses loom larger than gains we consider two types of loss aversion defined by two interpretations of loss a loss can be defined 1 in terms of valence or 2 in terms of possession correspondingly valence loss aversion vla entails greater sensitivity to negative vs positive changes and possession loss aversion pla entails greater sensitivity to items leaving vs entering one s possession both types of loss aversion imply an endowment effect for attractive items but pla implies a reversal of the endowment effect for unattractive items experimental results show endowment effect reversals consistent with pla

divergence in alternative hicksian welfare measures the case of revealed preference for public amenities this paper investigates the divergence between the two hicksian welfare measures of non traded amenity improvement associated with housing first the hicksian surplus measures for amenity changes are analytically developed based on explicit specification of utility structures a hedonic two stage approach is then applied to empirically show that for quantity changes in contrast to hypothetical markets divergence in real market is small the paper also analytically develops expressions for the income and substitution effects and empirically shows that for a given income effect the greater the substitution effect the smaller the divergence between the two measures copyright 2002 john wiley sons ltd

preference anomalies preference elicitation and the discovered preference hypothesis there is wide ranging evidence much of it deriving from economics experiments of anomalies in behaviour that challenge standard preference theories this paper explores the implications of these anomalies for preference elicitation methods because methods that are used to inform public policy such as contingent valuation are based on standard preference theories their validity may be called into question by the anomaly data however on a new interpretation these anomalies do not contradict standard theory but are errors in stated preference that can be expected to disappear as people become more experienced in relevant decision environments we explore the evidence for this interpretation and what implications follow for preference elicitation methodology

status quo maintenance reconsidered changing or incomplete preferences after reviewing the evidence for status quo maintenance sqm i consider how to reconcile sqm with traditional consumer theory behavioural economists usually let agents preferences change as a function of their endowments treating the same person with different endowments as a set of distinct agents many properties of preferences then become immune to empirical test and it becomes impossible to judge whether an agent s decisions make the agent better or worse off this impedes prediction of when decision rules are likely to change sqm can alternatively be explained with unchanging preferences if preferences are incomplete sqm is then consistent with self interest and there is no reason why it should not persist

remedying education evidence from two randomized experiments in india this paper presents the results of a two year randomized evaluation of a large scale remedial education program conducted in mumbai and vadodara india the remedial education program hires young women from the community to teach basic literacy and numeracy skills to children who reach standard three or four without having mastered these competencies the program implemented by a ngo in collaboration with the government is extremely cheap it cost 5 dollars per child per year and is easily replicable it has been implemented in 20 indian cities and reached tens of thousands of children we find the program to be very effective on average it increased learning by 0 15 standard deviations in the first year and 0 25 in the second year the gains are the largest for children at the bottom of the distribution children in the bottom third gain 0 2 standard deviations in the first year and 0 32 in the second year in math they gain 0 51 standard deviation in the second year the results are similar in the two grade levels and in the two cities at the margin extending this program would be up to 12 16 times more cost effective than hiring new teachers authors

anomalies and stated preference techniques a framework for a discussion of coping strategies this paper introduces a symposium on the issue of how stated preference sp research can best cope with anomalies i e systematic deviations from the predictions of standard economic theory in survey responses it proposes a framework for constructive debate recognising i the legitimate aspirations of sp research ii the relevance of evidence from sources other than best practice sp and iii the precautionary value of investigating strategies for coping with suspected anomalies even if questions about the robustness of anomalies have not been finally resolved five alternative coping strategies discussed in more detail in the symposium are briefly introduced

randall and stoll s bound in an inverse demand system abstract this letter extends randall and stoll s and hanemann s results into a complete inverse demand system it provides a theoretically consistent framework for welfare measurement under quantity restrictions and free adjustment of prices in an equilibrium it is found that randall and stoll s and hanemann s results should be modified to fit into the complete inverse demand system since they may give misleading interpretation of empirical studies in some cases

homeownership social capital and satisfaction with local government prior studies suggest that homeownership positively impacts on social capital formation however many studies find it difficult to control adequately for selection effects in the form of factors some of which may be unobserved that encourage both homeownership and investment in social capital by households a biennial survey conducted in new zealand cities provides data that enable the control of such selection effects with propensity score matching methods while also benchmarking the results by means of regression methods the results confirm that homeownership exerts positive impacts on the formation of social capital at the same time homeownership demands greater accountability of local government and leads to reduced satisfaction with local government performance thereby negatively impacting on community social capital hence these two dimensions of housing related social capital work in opposite directions from each other a finding which has not been previously observed

experiments on the difference between willingness to pay and willingness to accept comment reply willingness to pay wtp and willingness to accept wta measures of welfare change have been found to differ substantially when elicited from surveys or experimental market transactions conventional economic theory suggests that the difference between wtp and wta should be smaller than those observed in empirical tests this study focuses on the hypothesis that the availability of substitutes for the good being evaluated affects the difference between the two measures the results suggest that the existence of a substitute does reduce the difference between wtp and wta however the difference between these two measures is significant with or without substitutes

consumption self control by rationing purchase quantities of virtue and vice consumers attempts to control their unwanted consumption impulses influence many everyday purchases with broad implications for marketers pricing policies addressing theoreticians and practitioners alike this paper uses multiple empirical methods to show that consumers voluntarily and strategically ration their purchase quantities of goods that are likely to be consumed on impulse and that therefore may pose self control problems for example many regular smokers buy their cigarettes by the pack although they could easily afford to buy 10 pack cartons these smokers knowingly forgo sizable per unit savings from quantity discounts which they could realize if they bought cartons by rationing their purchase quantities they also self impose additional transactions costs on marginal consumption which makes excessive smoking overly difficult and costly such strategic self imposition of constraints is intuitively appealing yet theoretically problematic the marketing literature lacks operationalizations and empirical tests of such consumption self control strategies and of their managerial implications this paper provides experimental evidence of the operation of consumer self control and empirically illustrates its direct implications for the pricing of consumer goods moreover the paper develops a conceptual framework for the design of empirical tests of such self imposed constraints on consumption in consumer goods markets within matched pairs of products we distinguish relative virtue and vice goods whose preference ordering changes with whet her consumers evaluate immediate or delayed consumption consequences for example ignoring long term health effects many smokers prefer regular relative vice to light relative virtue cigarettes because they prefer the taste of the former however ignoring these short term taste differences the same smokers prefer light to regular cigarettes when they consider the long term health effects of smoking these preference orders can lead to dynamically inconsistent consumption choices by consumers whose tradeoffs between the immediate and delayed consequences of consumption depend on the time lag between purchase and consumption this creates a potential self control problem because these consumers will be tempted to over consume the vices they have in stock at home purchase quantity rationing helps them solve the self control problem by limiting their stock and hence their consumption opportunities such rationing implies that per purchase occasion vice consumers will be less likely than virtue consumers to buy larger quantities in response to unit price reductions such as quantity discounts we first test this prediction in two laboratory experiments we then examine the external validity of the results at the retail level with a field survey of quantity discounts and with a scanner data analysis of chain wide store level demand across a variety of different pairs of matched vice regular and virtue reduced fat calorie or caffeine etc product categories the analyses of these experimental field and scanner data provide strong convergent evidence of a characteristic crossover in demand schedules for relative vices and virtues for categories as diverse as among others potato chips chocolate chip cookies cream cheese beer soft drinks ice cream and frozen yogurt chewing gum coffee and beef andturkey bologna vice consumers demand increases less in response to price reductions than virtue consumers demand although their preferences are not generally weaker for vices than for virtues constraints on vice purchases are self imposed and strategic rather than driven by simple preferences we suggest that rationing their vice inventories at the point of purchase allows consumers to limit subsequent consumption as a result of purchase quantity rationing however vice buyers forgo savings from price reductions through quantity discounts effectively paying price premiums for the opportunity to engage in self control thus purchase quantity rationing vice consumers are relatively price in sensitive from a managerial and public policy perspective our findings should offer marketing practitioners in many consumer goods industries new opportunities to increase profits through segmentation and price discrimination based on consumer self control they can charge premium prices for small sizes of vices relative to the corresponding quantity discounts for virtues virtue consumers on the other hand will buy larger amounts even when quantity discounts are relatively shallow a key conceptual contribution of this paper lies in showing how marketing researchers can investigate a whole class of strategic self constraining consumer behaviors empirically moreover this research is the first to extend previous theoretical work on impulse control by empirically demonstrating its broader implications for marketing decision making

economic status and health in childhood the origins of the gradient the well known positive association between health and income in adulthood has antecedents in childhood not only is children s health positively related to household income but the relationship between household income and children s health becomes more pronounced as children age part of the relationship can be explained by the arrival and impact of chronic conditions children from lower income households with chronic conditions have worse health than do those from higher income households the adverse health effects of lower income accumulate over children s lives part of the intergenerational transmission of socioeconomic status may work through the impact of parents income on children s health

modeling loss aversion and reference dependence effects on brand choice based upon a recently developed multiattribute generalization of prospect theory s value function tversky and kahneman 1991 we argue that consumer choice is influenced by the position of brands relative to multiattribute reference points and that consumers weigh losses from a reference point more than equivalent sized gains loss aversion we sketch implications of this model for understanding brand choice we develop a multinomial logit formulation of a reference dependent choice model calibrating it using scanner data in addition to providing better fit in both estimation and forecast periods than a standard multinomial logit model the model s coefficients demonstrate significant loss aversion as hypothesized we also discuss the implications of a reference dependent view of consumer choice for modeling brand choice demonstrate that loss aversion can account for asymmetric responses to changes in product characteristics and examine other implications for competitive strategy

understanding the disparity between wtp and wta endowment effect substitutability or imprecise preferences abstract although it is now generally accepted that willingness to accept exceeds willingness to pay disagreement remains as to why this disparity is shown to persist even when controlling for learning substitutability and respondents imprecision thus lending further support for the endowment effect

complementarity and the measurement of individual risk tradeoffs accounting for quantity and quality of life effects this paper considers the factors responsible for differences with age in estimates of the wage compensation an individual requires to accept increased occupational fatality risk we derive a relationship between the value of a statistical life vsl and the degree of complementarity between consumption and labor supplied when health status serves as a potential source of variation in this relationship our empirical analysis finds that variations in an individual s health status or quality of life and anticipated longevity threats lead to significant differences in the estimated wage risk tradeoffs we describe how extensions to the specification of hedonic wage models including measures for quality of life and anticipated longevity threats help to explain the diversity in past studies examining how the estimated wage risk tradeoff changes with age

disease and development evidence from hookworm eradication in the american south this study evaluates the economic consequences of the successful eradication of hookworm disease from the american south the hookworm eradication campaign c 1910 began soon after i the discovery that a variety of health problems among southerners could be attributed to the disease and ii the donation by john d rockefeller of a substantial sum to the effort the rockefeller sanitary commission rsc surveyed infection rates in the affected areas eleven southern states and found that an average of forty percent of school aged children were infected with hookworm the rsc then sponsored treatment and education campaigns across the region follow up studies indicate that this campaign substantially reduced hookworm disease almost immediately the sudden introduction of this treatment combines with the cross area differences in pre treatment infection rates to form the basis of the identification strategy areas with higher levels of hookworm infection prior to the rsc experienced greater increases in school enrollment attendance and literacy after the intervention this result is robust to controlling for a variety of alternative factors including differential trends across areas changing crop prices shifts in certain educational and health policies and the effect of malaria eradication no significant contemporaneous results are found for adults who should have benefited less from the intervention owing to their substantially lower prior infection rates a long term follow up of affected cohorts indicates a substantial gain in income that coincided with exposure to hookworm eradication i also find evidence that eradication increased the return to schooling

the rate of return to the high scope perry preschool program abstract this paper estimates the rate of return to the highscope perry preschool program an early intervention program targeted toward disadvantaged african american youth estimates of the rate of return to the perry program are widely cited to support the claim of substantial economic benefits from preschool education programs previous studies of the rate of return to this program ignore the compromises that occurred in the randomization protocol they do not report standard errors the rates of return estimated in this paper account for these factors we conduct an extensive analysis of sensitivity to alternative plausible assumptions estimated annual social rates of return generally fall between 7 and 10 with most estimates substantially lower than those previously reported in the literature however returns are generally statistically significantly different from zero for both males and females and are above the historical return on equity estimated benefit to cost ratios support this conclusion

why do mothers breastfeed girls less than boys evidence and implications for child health in india breastfeeding is negatively correlated with future fertility because nursing temporarily reduces fecundity and because mothers usually wean on becoming pregnant again we model breastfeeding under son biased fertility preferences and show that breastfeeding duration increases with birth order especially near target family size is lowest for daughters and children without older brothers because their parents try again for a son and exhibits the largest gender gap near target family size when gender is most predictive of subsequent fertility data from india confirm each prediction moreover child survival exhibits similar patterns especially in settings where the alternatives to breastmilk are unsanitary

early life health interventions and academic achievement this paper studies the effect of improved early life health care on mortality and long run academic achievement in school we use the idea that medical treatments often follow rules of thumb for assigning care to patients such as the classification of very low birth weight vlbw which assigns infants special care at a specific birth weight cutoff using detailed administrative data on schooling and birth records from chile and norway we establish that children who receive extra medical care at birth have lower mortality rates and higher test scores and grades in school these gains are in the order of 0 15 0 22 standard deviations

determinants of participation in accelerated vehicle retirement programs one potential way to reduce hydrocarbon emission is through accelerated vehicle retirement programs however it is difficult to forecast participation rates in these programs because the number and characteristics of participants are likely to vary with the price offered to attract old cars this paper presents a theoretical model of the owner s car tenure and scrappage decision an econometric model of participation is then developed and estimated using data from a recent old vehicle scrap program in delaware participation rates at different possible offer prices are then predicted

the time vs money effect shifting product attitudes and decisions through personal connection the results of five field and laboratory experiments reveal a time versus money effect whereby activating time vs money leads to a favorable shift in product attitudes and decisions because time increases focus on product experience activating time vs money augments one s personal connection with the product thereby boosting attitudes and decisions however because money increases the focus on product possession the reverse effect can occur in cases where merely owning the product reflects the self i e for prestige possessions or for highly materialistic consumers the time versus money effect proves robust across implicit and explicit methods of construct activation

the scope trials variation in sensitivity to scope and wtp with directionally bounded utility functions abstract sensitivity to scope refers to the property that willingness to pay for an environmental amenity is an increasing function of the scope of the amenity measurements of the degree of sensitivity to scope are commonly proposed as a test for the reliability of contingent valuation studies we evaluate the traditional scope test using neoclassical utility functions that are directionally bounded we provide a formal definition of sensitivity to scope and show that directionally bounded utility functions can produce arbitrarily small degrees of sensitivity to scope we conclude that a failure to satisfy existing scope tests should not be used as a prima facie basis for rejecting contingent valuation studies this does not imply that small degrees of sensitivity to scope should always be viewed as acceptable rather the results of scope tests should be considered more carefully with attention given to the substitutability of market and non market goods

socioeconomic status and child health why is the relationship stronger for older children case lubotsky and paxson 2001 show that the well known relationship between socio economic status ses and health exists in childhood and grows more pronounced with age however in cross sectional data it is difficult to distinguish between two possible explanations the first is that low ses children are less able to respond to a given health shock the second is that low ses children experience more shocks we show using panel data on canadian children that 1 the gradient we estimate in the cross section is very similar to that estimated previously using u s children 2 both high and low ses children recover from past health shocks to about the same degree and 3 that the relationship between ses and health grows stronger over time mainly because low ses children receive more negative health shocks in addition we examine the effect of health shocks on math and reading scores we find that health shocks affect test scores and future health in very similar ways our results suggest that public policy aimed at reducing ses related health differentials in children should focus on reducing the incidence of health shocks as well as on reducing disparities in access to palliative care

what do income tests tell us about the gap between wta and wtp for public goods abstract theory relates the gap between wta willingness to accept compensation and wtp willingness to pay to the income elasticity of wtp it has been suggested that empirical estimates of the income elasticity of wtp can therefore be used to test whether an observed gap between wta and wtp is consistent with rational behavior we examine this issue for the case of non market public goods we identify the theoretically appropriate tests of income sensitivity and examine conditions for valid income sensitivity tests we show that income tests may provide false signals in common settings indicating an inconsistency where none exists

using choice experiments to value the natura 2000 nature conservation programs in finland this paper is concerned with the preferences of the finnish households for a controversial nature conservation program the european union s natura 2000 network since the program was mainly based on biological considerations it met strong public opinions from different interest groups in finland using the choice experimental method we attempt to estimate the values that the finnish households would place on different preservation levels it is found that the mean willingness to accept for a decrease in the nature preservation area is much greater than the mean willingness to pay for an increase by the same amount also the marginal willingness to pay becomes zero after an initial increase in the natural preservation area which is consistent with our earlier findings in a binary choice valuation study policy implications of these results are also discussed in relation to different decision criteria

conspicuous consumption and dynamic pricing how do firms develop marketing strategy when consumers seek to satisfy both quality and status related considerations we develop an analytical model to study this issue examining both pricing and product management decisions in markets for conspicuous durable goods our analysis yields many interesting and nontrivial insights first we demonstrate that high intrinsic quality indirectly generates exclusivity via pricing effects in turn this exclusivity generates considerable social payoffs where consumers value status this insight reverses the direction of causality in the existing literature wherein only status considerations matter and mere price increases may enhance consumer utility second our dynamic model indicates that where consumers prioritize status benefits producers incur substantial price depreciation in equilibrium third we examine the product management strategies used by firms to preserve early adopter exclusivity finally we discuss the boundary conditions of our results as well as our results implications for managerial and policy issues

sequencing and valuing public goods abstract this paper establishes several propositions concerning the importance of context in valuing public goods it first provides necessary and sufficient conditions for the value of a public good to be independent of context utility constant valuation sequences are considered where public goods are systematically made available or taken away for the case of strict hicksian substitutes willingness to pay for an increase in one of the public goods is strictly decreasing the farther out in a sequence it is valued for the destruction of public goods the reverse is true for willingness to accept compensation sequencing has opposite implications for the assessment of the benefits of providing public goods than for the assessment of the damage from destroying them

goal based construction of preferences task goals and the prominence effect preferences inferred from choice are more likely to favor the alternative that is superior with respect to the prominent most important or salient attribute than are preferences inferred from matching direct tradeoff judgments this prominence effect violates standard models of rational choice and complicates the task of measuring preferences in this article we propose a new task goal hypothesis regarding the prominence effect the prominent attribute receives more weight in tasks whose goal is to differentiate among options than in tasks whose goal is to equate options we use this hypothesis to generalize the prominence effect beyond choice and matching to several additional tasks including the choice based matching and difference comparison methods that are widely employed in decision analysis the results of three studies provide strong support for the task goal account of the prominence effect and cast doubt on competing explanations we discuss the implications of these findings for descriptive decision theory and for preference measurement in decision analysis public policy and marketing

self control for the righteous toward a theory of precommitment to indulgence prior research has examined consumers use of self control to avoid hedonic myopic temptations such as overspending and smoking in this research we investigate the opposite form of self control whereby consumers force themselves to indulge and avoid default forms of spending on utilitarian necessities and or savings in particular consumers who have difficulty choosing items that are perceived as indulgences or luxuries e g a cruise over necessities e g saving for college education and cash in everyday decisions may use precommitments to indulgence especially when the psychological cost of such commitments is less concrete these propositions were tested in a series of studies involving real and hypothetical choices as well as process measures the results indicate that a substantial segment of consumers choose hedonic luxury rewards over cash of equal or greater value consumers typically explain such choices based on the need to precommit to indulgence to make sure that the award does no

modeling hedonic portfolio products a joint segmentation analysis of music compact disc sales abstract the authors present a framework that enables researchers to differentiate better among a wide array of hedonic products specifically the authors define and discuss characteristics of hedonic portfolio products and offer a joint segmentation model that is appropriate for understanding the sales dynamics of this class of products the model offered in this article can accommodate a large degree of product heterogeneity through product clusters and model covariates the basic premise is that several generic consumer segments exist and remain fixed across all albums and each album or each cluster of similar albums can be viewed as drawing different proportions from each of these underlying segments the authors also allow explanatory variables to have a differential impact on both components of the model that is accelerating purchase rates within a consumer segment and changing the proportions drawn from each consumer segment by each product cluster thereby expanding or contracting the potentia

self signaling and the costs and benefits of temptation in consumer choice abstract the literature on self control emphasizes that temptation is costly the authors propose that temptation entails not only costs but also benefits for consumers these arise from self signaling effects of how consumers handle tempting choice options succumbing to temptation is a costly self signal of weak willpower whereas resisting temptation is a beneficial self signal of strong willpower five experiments demonstrate that these self signaling costs and benefits of temptation depend not only on the chosen item but also on the temptation from the nonchosen options the authors discuss theoretical implications of their findings for research on impulsive choice and self control and on self signaling and managerial implications for pricing and assortment strategies

consumer loss aversion product experimentation and tacit collusion abstract two firms compete to attract loss averse consumers that are uncertain about how well the goods on sale fit their needs to resolve valuation uncertainty firms can allow prospective customers to test experiment their products before purchase we investigate firms dynamic incentives to allow experimentation and analyze the resulting effects on the profitability and the stability of tacit collusion depending on the regulatory regime in place i e whether experimentation is forbidden mandated or simply allowed but not imposed laissez faire the degree of loss aversion has ambiguous effects both on the profits that firms can achieve through tacit collusion and on the stability of these agreements while in static environments consumer welfare is always maximized by a policy that forbids experimentation the opposite happens in a dynamic environment

the determinants of human capital formation during the early years of life theory measurement and policies in this paper i discuss a research agenda on the study of human capital accumulation in the early years with a particular focus on developing countries i discuss several methodological issues from the use of structural models to the importance of measurement and the development of new measurement tools i present a conceptual framework that can be used to frame the study of human capital accumulation and view the current challenges and gaps in knowledge within such an organizing structure i provide an example of the use of such a framework to interpret the evidence on the impacts of an early years intervention based on randomized controlled trial

risk preferences and demand drivers of extended warranties we disentangle and study the relative importance of different risk preferences in explaining extended warranty purchases and the high premia paid for them empirical and behavioral research on insurance is at odds with whether diminishing returns curvature of the utility function or loss aversion and nonlinear probability weighting lead to observed consumer behavior this lack of consensus is primarily due to the inability of standard choice data to separate different risk preferences and the consequent need to rely on strong parametric assumptions we design two conjoint studies consistent with simultaneous and sequential decision making with choices about washing machines and extended warranties where subjects are given failure probabilities and repair costs using stated choice data from the surveys we can nonparametrically identify product and risk preferences we find that loss aversion is significantly more important than curvature and probability weights in explaining extended warranty choices importantly failure to decompose risk averse behavior into that arising from curvature loss aversion and probability weighting leads to lower washer prices and profits these findings are robust to alternate reference point assumptions we rationalize the premia paid for warranties by exploring retailer incentives to price discriminate and test the theory on complementary goods pricing finally based on counterfactual analysis forcing separate retailers to sell washers and extended warranties is not necessarily welfare enhancing as cited in the media and previous literature

measuring impartial preference for biodiversity biodiversity undergoes unprecedented rates of erosion despite the important services it provides this is considered evidence that biodiversity is undervalued biodiversity valuation is accordingly a prominent issue in the literature economic valuations are however largely criticized numerous alternatives have been introduced most of them involve participatory protocols aimed at producing high quality results being time consuming and expensive it is difficult to implement and reproduce them at a large scale we produce an easily reproducible inexpensive survey methodology to measure impartial preference for biodiversity we implement it in switzerland through a mail based survey our result is that biodiversity should be ranked after retirement schemes and public transportation but before relations with foreign countries order and security and culture and leisure in the expanses of the state current expenses therefore substantially underestimate the value that swiss people grant to biodiversity our new method is a viable alternative to standard economic valuation given the impartiality achieved at least in the swiss political context our estimate can be used by decision makers to assess the legitimacy of conservation programs or to gauge public support at a philosophical level our measure is relevant for public policies because it captures the stances that people take when they participate in public decisions

flying under the radar perverse package size effects on consumption self regulation consumers believe that small package formats of hedonic but not of utilitarian products help to regulate consumption especially when their self regulatory concerns are activated these beliefs may backfire and increase consumption of hedonic products specifically activating self regulatory concerns had no consumption effects when tempting products came in small package formats yet when tempting products came in large package formats consumers deliberated most before consumption were least likely to consume and consumed the least this illustrates how small temptations can remain undetected flying under the radar and large package formats may reduce consumption as a result of the experienced self control conflict

economic valuation of the environment how citizens make sense of contingent valuation questions this study adopts a qualitative approach in order to investigate how people make sense of contingent valuation cv questions of a global environmental amenity the objective is not only to capture people s motivations and considerations of willingness to pay wtp but also to determine if they adequately comprehend an economic valuation of such public goods the findings indicate that a large proportion of respondents do not interpret the valuation task as intended however this lack of understanding is not always expressed unless probed in relation to the elicitation question and some people have the tendency to provide monetary estimates anyway whatever meaning they attach to these

willingness to pay and willingness to accept how much can they differ comment i agree with the point made by edoh y amiran and daniel a hagen 2003 that there can be a substantial or even infinite divergence between the wta and wtp for a public good even where there is a nonzero elasticity of substitution between market goods and the public good provided that the indifference curves are asymptotically bounded with respect to market goods in the manner they describe this is an important point they are also correct to point out that the elasticity of substitution is a local concept whereas their asymptotic boundedness condition applies also for discrete changes my 1991 paper used a local analysis because it was following the structure of the analysis in robert d willig 1976 and alan randall and john r stoll 1980 i wanted to show that while randall and stoll appeared to extend willig s local result on wta versus wtp from price changes to changes in the quantity of a public good the relevant elasticity was in fact different and involved the substitution elasticity as well as the income elasticity i view these points by amiran and hagen as not two separate results but essentially the same result their asymptotic boundedness condition generalizes my zero elasticity of substitution condition to discrete changes the asymptotic boundedness condition can be expressed as follows assuming a bivariate utility function u x q and given a reference point x q associated with a reference utility level u u x q there exists some q q such that for all q q there exists no x such that u x q u in other words no amount of x can substitute for the reduction in public good from q to q q in the case of a zero elasticity of substitution q q but as amiran and hagen show in their theorem 1 this is unnecessarily restrictive when dealing with a discrete reduction in q furthermore their theorem 2 can be viewed as a special case of their theorem 1 in which q 0 which makes q an essential commodity it is well known in consumer theory that the wta to avoid the loss of an essential market good is infinite their theorem 2 extends this result to the case of an essential nonmarket good but as their theorem 1 shows essentialness is not necessary for an infinite wta the boundedness condition is the key and this implies a fundamental lack of substitutability between money market goods and the public good

the influence of price discount versus bonus pack on the preference for virtue and vice foods abstract the authors find that consumers prefer a bonus pack to a price discount for virtue foods but they prefer a price discount to a bonus pack for vice foods prior research has shown that all else being equal consumers prefer bonus packs to price discounts the authors propose that this preference does not hold for vice food because consumers cannot generate good justifications for buying such food when a bonus pack is offered because this would mean consuming more of the vice however a price discount on a vice food can be justified because it acts as a guilt mitigating mechanism for virtue foods the absence of both anticipated postconsumption guilt and the resultant need to justify leads consumers to prefer a bonus pack to a price discount the authors demonstrate the proposed effect and test its underlying process across five experiments

understanding how income influences willingness to pay for joint programs a more equitable value measure for the less wealthy the preponderance of evidence from many studies is that less wealthy households are subjected to greater exposure per capita and in aggregate to air pollution water pollution and toxic wastes it also is the case that the less wealthy are provided with a disproportionately low amount of other programs to enhance amenities provided by the natural environment such as recreational resources and high quality esthetic opportunities both quality and quantity however to date no study has quantified the scale of this effect on the less wealthy as compared to their more wealthy counterparts when it comes to policy choices made on the basis of benefits analysis this study provides a new equity adjustment method to measure quantitatively the effect of this inequity in the case of public goods

is food and drug administration policy governing artisan cheese consistent with consumers preferences abstract united states government policy prohibits the sale of cheese made from unpasteurized milk aged less than 60 days despite contested science behind the policy we use experimental auctions for artisan cheese to estimate the value of pasteurization and age as food safety attributes which is the rationale for the policy we also look at consumers perception of the tradeoff between safety and quality a survey was conducted with participants at farmers markets including experimental auctions and sensory analysis of pasteurized and unpasteurized cheese and questions concerning attitudes about food safety there is no evidence of positive demand for pasteurization and there is no evidence of a tradeoff between safety and quality on average artisan cheese consumers make purchasing decisions based on taste not their attitude toward food safety the results of this study raise questions about the possible extension of a minimum aging period for cheese made from unpasteurized milk

fertility at work children and women s labor market outcomes in urban ghana abstract while it is commonly assumed that fertility decreases female labor supply i show theoretically that fertility can increase female labor supply if returns to financial inputs in children are sufficiently high compared to returns to time investments using six rounds of a panel survey from urban ghana i find evidence of countervailing effects behind a net zero effect of young children on women s hours of work labor supply on the extensive margin drops but women who remain in the labor force increase their hours in response to a child women s labor supply particularly increases in response to a young child if there are older siblings or other adults in the household by contrast men s labor supply does not change in response to young children

consumer s surplus without apology the purpose of this paper is to settle the controversy surrounding consumer s surplus and by so doing to validate its use as a tool of welfare economics i will show that observed consumer s surplus can be rigorously utilized to estimate the unobservable compensating and equivalent variations the correct theoretical measures of the welfare impact of changes in prices and income on an individual i derive precise upper and lower bounds on the percentage errors of approximating the compensating and equivalent variations with consumer s surplus these bounds can be explicitly calculated from observable demand data and it is clear that in most applications the error of approximation will be very small in fact the error will often be overshadowed by the errors involved in estimating the demand curve the results in no way depend upon arguments about the constancy of the marginal utility of income consequently this paper supplies specific empirical criteria which can replace the apologetic caveats frequently employed by those who presently apply consumer s surplus moreover the results imply that consumer s surplus is usually a very good approximation to the appropriate welfare measures to preview below i establish the validity of these rules of thumb for a

benefit evaluation of the country of origin labeling in taiwan results from an auction experiment this research is aimed at investigating the consumer s preference for food produced in taiwan and the economic benefits for the country of origin labeling cool the study used vickrey second price sealed bid auction to elicit the consumer s willingness to pay wtp for products under cool the study compared the bid functions estimated with tobit model and the premium functions estimated with ordinary least squares ols due to price affiliation it is more reliable to use the estimated premium functions the estimated premiums are 67 5 84 7 and 99 for taiwan products over their alternatives of china olives china oolong tea and vietnam oolong tea respectively the study concludes that enacting and rigorously enforcing a cool law would increase economic benefits to consumers in taiwan and at the same time placing the imported products in the leveled playing field

social mixing and the management of disadvantaged neighbourhoods the dutch policy of urban restructuring revisited summary the dutch government currently pursues a comprehensive and ambitious policy of social mixing in disadvantaged neighbourhoods the second section of this paper suggests that it has as yet not been adequately explained why the dutch government pursues this so called restructuring policy the third section develops an approach derived from regulation theory that potentially helps to decipher the forces behind the dutch restructuring policy it is argued that planning practices and discourses should be analysed in relation to the dynamics of the regulatory framework in which they are embedded the remainder of the paper uses this approach to give an alternative account of the dutch restructuring policy suggesting that it represents an attempt to facilitate the social management of disadvantaged neighbourhoods thus it serves to mitigate the social effects of the problematic integration of ethnic minorities and facilitates a national city oriented growth strategy

inverse demand systems and welfare measurement in quantity space most studies of welfare or cost benefit analyses are concerned with the welfare effects of price changes 11 19 27 33 50 there are however many situations in which policy options are directly related to quantity changes the welfare effects of price changes are analyzed with the traditional demand system in which commodity quantities are determined as functions of their prices the welfare effects of quantity changes on the other hand are associated with the inverse demand system in which commodity prices are dependent on their quantities in conventional welfare analysis of price change prices are taken to be exogenous or predetermined while quantities are endogenous in contrast in welfare analysis of quantity changes quantities are exogenous while prices are endogenous price based or dual welfare measures are relevant when there are well functioning competitive markets and quantities are fully adjusted to changes in prices on the other hand quantity based or primal welfare measures are useful in situations where there are constraints on commodity quantities or when transaction costs impede consumers from fully adjusting to changes in prices the choice between priceand quantity based welfare measures is empirical and proper measurement of welfare effects requires the knowledge as to which variable price or quantity is the exogenous one for individual consumers it may be reasonable to assume that the supply of commodities is perfectly elastic and therefore prices can be taken as exogenous but this assumption may not be tenable for consumers in the aggregate or if highly aggregated economy wide data are used to estimate demand relations at the aggregate level quantities are more properly viewed as exogenous than are prices although individual consumers make their consumption decisions based on given prices the quantities of commodities are predetermined by production at the market level and prices must adjust so that the available quantities are consumed 28 1 2

paired comparison estimates of willingness to accept versus contingent valuation estimates of willingness to pay estimating empirical measures of an individual s willingness to accept that are consistent with conventional economic theory has proven difficult the method of paired comparison offers a promising approach to estimate willingness to accept this method involves having individuals make binary choices between receiving a particular good or a sum of money willingness to accept can be inferred from the ranking of dollar amounts and the good of interest using the paired comparison approach mean median willingness to accept for a private good is estimated at 59 52 contingent valuation estimate of willingness to pay for the same good yields a mean median of 28 28 while these estimates are statistically different the ratio of willingness to accept to willingness to pay is less than in most previous studies and closer to ratios found in actual cash experiments

incommensurate resources not just more of the same abstract the pricing literature is replete with research that focuses on how consumers respond to sales promotions when both the reference level and the change are expressed in dollar terms i e discounts the psychophysics of pricing suggests that changes in monetary magnitude are not based on their absolute level but rather on their deviation from some reference level or how the change is framed often however a promotion is presented in nonmonetary terms e g a premium when two resources are delivered simultaneously but in different currencies e g receive a free razor with the purchase of a can of shaving cream the marginal value of the nonmonetary incremental benefit may be difficult to evaluate in relation to the focal product or its price therefore the value of the premium may be less likely than a comparable discount to be viewed in a relative sense and thus less likely to suffer from diminishing marginal returns this research explores how people often fail to exhibit the sam

yes but this other one looks better works better how do consumers respond to trade offs between sustainability and other valued attributes consumers are increasingly facing product evaluation and choice situations that include information about product sustainability i e information about a product s relative environmental and social impact in many cases consumers have to make decisions that involve a trade off between product sustainability and other valued product attributes similarly product and marketing managers need to make decisions that reflect how consumers will respond to different trade off scenarios in the current research we study consumer responses across two different possible trade off scenarios one in which consumers face a trade off between product sustainability and hedonic value and another in which they must trade off between product sustainability and utilitarian value our results suggest that overall consumers are more likely to trade off hedonic value e g esthetics for sustainability than to trade off utilitarian value e g functional performance for sustainability in studies 1a and 1b we presented participants with a product choice task and also measured their anticipatory emotions as they contemplated their options the results suggest that given a trade off consumers are more likely to choose a sustainable product when they have to trade off hedonic value than when they have to trade off utilitarian value further these studies provide some insight into the emotions underlying this effect in study 2 we use a different consumer response measure relative purchase likelihood and investigate the effect of trade off type across categories that vary in the degree to which hedonic and utilitarian attributes are perceived to be important referred to as product type our results suggest that the effect of trade off type still holds yet is moderated by product type such that consumers greater willingness to trade off hedonic value vs utilitarian value for sustainability is attenuated as the relative importance of hedonic vs utilitarian attributes increases in addition to building on our theoretical understanding of decision making given trade offs with moral attributes this research is also intended to support managers as they define and choose among various strategic product development and marketing promotion options

preference reversals in willingness to pay and choice a fundamental contribution of consumer behavior research is to help marketing scholars develop an understanding of how people think about and express their preferences in this article we find that two commonly used preference elicitation procedures willingness to pay wtp and choice are consistently associated with different expressed preferences specifically choices are associated with a relatively greater preference for hedonic goods while wtp is associated with a relatively greater preference for utilitarian goods we find that this is caused in part by the greater reliance on deliberation in determining wtp values while preferences in choices are determined by an affect heuristic unlike other choice and wtp preference reversals we find that this effect is not caused by mechanical determinants such as scale compatibility as the effect persists with continuous scale measures that rely on affect and with choice based scale measures that rely on determining valuation

despairing over disparities explaining the difference between willingness to pay and willingness to accept this paper examines the three major explanations for the disparity between willingness to pay wtp and willingness to accept wta observed in contingent value surveys and laboratory experiments a belief that the results must be biased in some fashion hanemann s 1991 substitutes hypothesis and the loss aversion model proposed by tversky and kahneman 1991 starting from the assumption that individuals make utility maximizing choices we develop structural equations that yield parametric tests of the hypotheses within a single non experimental framework the approach is flexible enough to incorporate a variety of functional form and distributional assumptions and can be applied to either data from either open ended bids or dichotomous choice questions the usefulness of the approach is demonstrated using data from a survey that asked both wtp and wta questions the results provide weak support for loss aversion

multiple routes to self versus other expression in consumer choice abstract studies of consumer decision making often begin with the identification of a dimension on which options differ followed by an analysis of the factors that influence preferences along that dimension building on a conceptual analysis of a diverse set of problems the authors identify a class of related consumers choices e g extreme vs compromise hedonic vs utilitarian risky vs safe that can all be classified according to their levels of self versus other expression or un conventionality as shown in four studies these problem types respond similarly to manipulations that trigger or suppress self expression specifically priming self expression systematically increases the share of the self expressive options across choice problems conversely expecting to be evaluated decreases the share of the self expressive options across the various choice dilemmas in addition priming risk seeking increases only the choice of risky gambles but not of other self expressive options these find

consistency between contingent valuation estimates a comparison of two studies of uk national parks bateman i willis k and garrod g 1994 consistency between contingent valuation estimates a comparison of two studies of uk national parks reg studies 28 457 474 recent years have seen a significant increase in the application of the contingent valuation method to the evaluation of environmental preferences in the uk recent theoretical and methodological developments suggest that this increase is likely to be sustained for the foreseeable future this paper examines the issue of consistency across studies carried out to date in the uk attention is initially focused upon two major studies which allow the comparison of a number of findings analysis is then extended to a large number of smaller studies these comparisons suggest that the results obtained to date are both consistent and logically ordered with reference to the environmental good and the change in provision under consideration across studies bateman i willis k et garrod g 1994 la coherence des estimations contingentes une

focusing on the forgone how value can appear so different to buyers and sellers we propose that buying and selling price estimates reflect a focus on what the consumer forgoes in the potential exchange and that this notion offers insight into the well known difference between those two types of value assessment buyers and sellers differ not simply in their valuation of the same item but also in how they assess the value buyers tend to focus on their sentiment toward what they forgo typically the expenditure and buying prices are thus heavily influenced by variables such as salient reference prices by the same token sellers tend to focus on their sentiment toward surrendering the item and selling prices are hence more heavily influenced by variables such as benefits of possessing the item four studies examining buying and selling price estimates of tickets for national collegiate athletic association basketball games offer consistent support for these ideas the studies show that naturally occurring differences among respondents in attitudes relating to the tickets that sellers forgo e g significance of the game corresponded more closely to variation in selling prices than in buying prices conversely measures relating to the expenditure e g respondents concern with money corresponded more closely to buying prices than to selling prices using controlled manipulations we then showed that changes in aspects relating to the game e g expected climate in the stadium affected selling prices more than buying prices but changes relating to the expenditure e g list price of the ticket influenced buying prices more than selling prices we also showed that drawing attention to the benefits of possessing a ticket before asking for the price estimates influenced buying prices more than selling prices supporting our claim that otherwise these benefits are naturally more salient to sellers than buyers similarly drawing attention to alternative uses of money before asking for price estimates influenced selling prices more than buying prices

contingent valuation theoretical advances and empirical tests since the noaa panel beyond a simple cost effectiveness role and for many policy issues where all the goods or impacts at issue are not readily priced in the market the relevance of economics depends to a large degree on the ability to use contingent valuation cv and other closely related stated preference approaches the government s use of cv as a tool to place a monetary value on damages from the exxon valdez oil spill brought forth strong industry objections to the use of cv in response the national oceanic and atmospheric administration noaa one of the trustee agencies in the exxon valdez case commissioned a blue ribbon panel chaired by kenneth arrow and robert solow to review the use of cv in natural resource damage assessment proceedings the panel s report arrow et al and transmittal letter to the noaa general counsel concluded cv studies can produce estimates reliable enough to be the starting point for a judicial or administrative determination of nat

consumer choice between hedonic and utilitarian goods abstract in this article the authors examine how consumer choice between hedonic and utilitarian goods is influenced by the nature of the decision task building on research on elaboration the authors propose that the relative salience of hedonic dimensions is greater when consumers decide which of several items to give up forfeiture choices than when they decide which item to acquire acquisition choices the resulting hypothesis that a hedonic item is relatively preferred over the same utilitarian item in forfeiture choices than in acquisition choices was supported in two choice experiments in a subsequent experiment these findings were extended to hypothetical choices in which the acquisition and forfeiture conditions were created by manipulating initial attribute level reference states instead of ownership finally consistent with the experimental findings a field survey showed that relative to market prices owners of relatively hedonic cars value their vehicles more than do owners of relat

justification effects on consumer choice of hedonic and utilitarian goods abstract people want to have fun and they are more likely to have fun if the situation allows them to justify it this research studies how people s need for justifying hedonic consumption drives two choice patterns that are observed in typical purchase contexts first relative preferences between hedonic and utilitarian alternatives can reverse depending on how the immediate purchase situation presents itself a hedonic alternative tends to be rated more highly than a comparable utilitarian alternative when each is presented singly but the utilitarian alternative tends to be chosen over the hedonic alternative when the two are presented jointly second people have preferences for expending different combinations of time effort and money for acquiring hedonic versus utilitarian items they are willing to pay more in time for hedonic goods and more in money for utilitarian goods the author explores the topic through a combination of four experiments and field studies

seize the day or save the world the importance of ethical claims and product nature congruity consumers have shown increasing interest in products that reflect social and environmental concerns so called sustainable products although consumers typically view sustainability positively the ethical attributes of products do not always drive their preferences which implies a trade off between ethical attributes and other valued attributes in the current research we examine how consumers implicitly judge products and services that are more or less congruent with social and environmental concerns and how incongruity between ethical claims and a product s nature may influence consumers to behave responsibly the results from two experimental studies show that increasing the strength of ethical claims impairs sophisticated products evaluation but enhances simple products evaluation additionally the findings reveal that the strength of ethicality on sophisticated products may impair perceptions of product enjoyment to a point at which products are evaluated more favorably when less ethical claims are used to promote them for managers the results highlight an important business consideration as they reveal the circumstances under which it is worth emphasizing the strength of the sustainability appeal of products or services results show that not all consumers are willing to sacrifice taste or quality in their leisure time preferring to seize the day rather than saving the world

cost conscious the neural and behavioral impact of price primacy on decision making price is a key factor in most purchases but it can be presented at different stages of decision making the authors examine the sequence dependent effects of price and product information on the decision making process at both neural and behavioral levels during functional magnetic resonance imaging the price of a product was shown to participants either before or after the product itself was presented early exposure to price or price primacy altered the process of valuation as observed in altered patterns of activity in the medial prefrontal cortex immediately before making a purchase decision specifically whereas viewing products first resulted in evaluations strongly related to products attractiveness or desirability viewing prices first appeared to promote overall evaluations related to products monetary worth consistent with this framework the authors show that price primacy can increase purchase of bargain priced products when their worth is easily recognized together these results

the effect of a delay between choice and consumption on consumption enjoyment a consumer choosing a product must often wait before consuming it in this article we consider the consequences of waiting on consumption enjoyment we propose that the effect of a delay on consumption enjoyment depends on both the negative utility of the wait itself and on the positive utility of anticipating a pleasant consumption experience these factors exert different degrees of influence depending on characteristics of the decision task the results of three studies suggest that a delay increases consumption enjoyment for pleasurable products when actual consumption occurs but decreases enjoyment for imagined consumption furthermore the vividness of the awaited product moderates these effects

parental beliefs about returns to educational investments the later the better in this paper we study parental beliefs about the returns to parental investments made during different periods of childhood using two independent samples we document that parents perceive the returns to different late investments to be higher than the returns to early investments and that they perceive investments in different time periods as substitutes rather than complements we show that parental beliefs about the returns to investments vary substantially across the population and that individual beliefs are predictive of actual investment decisions moreover we document that parental beliefs about the productivity of investments differ significantly across socioeconomic groups perceived returns to early parental investments are positively associated with household income thereby potentially contributing to the intergenerational persistence in earnings

do people anticipate loss aversion there is growing interest in the use of loss contracts that offer performance incentives as up front payments that employees can lose standard behavioral models predict a trade off in the use of loss contracts employees will work harder under loss contracts than under gain contracts but anticipating loss aversion they will prefer gain contracts to loss contracts in a series of experiments we test these predictions by measuring performance and preferences for payoff equivalent gain and loss contracts we find that people indeed work harder under loss than gain contracts as the theory predicts surprisingly rather than a preference for the gain contract we find that people actually prefer loss contracts in exploring mechanisms for our results we find suggestive evidence that people do anticipate loss aversion but select into loss contracts as a commitment device to improve performance using one bias loss aversion to address another dynamic inconsistency data as supplemental material are a