resolving differences in willingness to pay and willingness to accept reply gwendolyn c morrison 1997 raises a logical point regarding our experimental test of the divergence between willingness to pay wtp and willingness to accept wta measures of economic value shogren et al 1994 she argues that our design does not provide a true test of the existence of a fundamental endowment effect since we did not control for the potential of a pivoting indifference map daniel kahneman et al 1990 she concludes that even though our ev idence shows that the mean wtp and wta bids for market goods with close substitutes e g candy bars and coffee mugs converge after market experience the endowment effect might still be alive and well albeit at statisti cally insignificant levels

how much is too much an investigation of the effect of the number of choice sets context dependence and the choice of bid vectors in choice experiments in a split sample design we examine how the number of choice sets design of the first choice set context dependence and the choice of attribute levels in the cost attribute affect the precision in the elicited preferences in otherwise completely identical choice experiment surveys these issues are investigated for swedish households marginal willingness to pay to reduce power outages our results indicate that neither the number of choice sets nor the design of the first choice set has a significant impact on estimated marginal willingness to pay while the effect was significant for the additive scaling of the cost vector at the end of the article we discuss the implications of our results on future developments and applications of choice experiments

ordering effects and choice set awareness in repeat response stated preference studies we present an experiment designed to investigate the presence and nature of ordering effects within repeat response stated preference sp studies our experiment takes the form of a large sample full factorial discrete choice sp exercise investigating preferences for tap water quality improvements our study simultaneously investigates a variety of different forms of position dependent and precedent dependent ordering effect in preferences for attributes and options and in response randomness we also examine whether advanced disclosure of the choice tasks impacts on the probability of exhibiting ordering effects of those different types we analyze our data both non parametrically and parametrically and find robust evidence for ordering effects we also find that the patterns of order effect in respondents preferences are significantly changed but not eradicated by the advanced disclosure of choice tasks a finding that offers insights into the choice behaviors underpinning order effects

modelling heterogeneity in response behaviour towards a sequence of discrete choice questions a probabilistic decision process model there is a growing body of evidence in the non market valuation literature suggesting that responses to a sequence of discrete choice questions tend to violate the assumptions typically made by analysts regarding independence of responses and stability of preferences decision processes or heuristics such as value learning and strategic misrepresentation have been offered as explanations for these results while a few studies have tested these heuristics as competing hypotheses none has investigated the possibility that each explains the response behaviour of a subgroup of the population in this paper we make a contribution towards addressing this research gap by presenting a probabilistic decision process model designed to estimate the proportion of respondents employing defined heuristics we demonstrate the model on binary and multinomial choice data sources and find three distinct types of response behaviour the results suggest that accounting for heterogeneity in response behaviour may be a better way forward than attempting to identify a single heuristic to explain the behaviour of all respondents

the disparity between willingness to accept and willingness to pay measures of value psychologists have long argued that people are much more averse to a loss than attracted to an equivalent gain this behavior termed loss aversion has been formalized by kahneman and tversky 1979 in their reformulation of expected utility theory prospect theory in prospect theory the utility function is replaced by a value function that evaluates changes in income from the current level increases in income are weighted by a relatively small marginal utility decreases in income are weighted by a much larger marginal utility in effect the value function implies that a kink in the relationship between utility and income occurs at the initial income or reference point and that the slope of the utility function for losses in income is steeper than it is for gains in a recent paper knetsch and sinden 1984 report a series of experiments that demonstrate the existence of a large disparity between willingness to accept wta and willingness to pay wtp measures of value they argue that the psychological theory of loss aversion explains this difference economic theory would suggest that individuals who exhibit a large disparity between wta and wtp are perhaps underperceiving the value of gains or overperceiving the value of losses are behaving in an irrational manner and will consequently achieve a lower level of well being than if they behaved in a true utility maximizing manner this would in contrast to loss aversion usually imply near equal values for wta and wtp see willig 1976 further documentation of a larger than expected disparity between wta and wtp has been obtained in surveys asking for the value of a variety of public goods for example cummings brookshire and schulze 1986 document six

sequence effects in the valuation of multiple environmental programs using the contingent valuation method in contingent valuation the willingness to pay for hypothetical programs may be affected by the order in which programs are presented to respondents with inclusive lists economic theory suggests that sequence effects should be expected however when policy makers allocate public budgets to several environmental programs they may be interested in assessing the value of the programs without the valuations being affected by the order in which the programs are presented using single bounded dichotomous choice contingent valuation questions we show that if respondents have the possibility to revise their willingness to pay answers sequence effects are mitigated

designing testing and implementing a trial dryland salinity credit trade scheme this article describes implementation and outcomes of a credit trading trial focussed on dryland salinity in victoria australia in lieu of extant specified property rights participants were invited to agree to obligations to provide groundwater recharge credits in exchange for pecuniary compensation participants were able to meet their obligations to supply groundwater recharge credits through land management actions resulting in monitored outcomes consistent with contractual obligations to reduce recharge alternatively those in deficit were provided the option to obtain sufficient credits through market exchange surplus transferable recharge credits were produced by those participants who exceeded their own contractual obligations through improved land management the paper describes the process of contract design and implementation the trial involved a design and testing phase and an on ground implementation phase we describe composite methodologies deployed in the design and testing of alternative policy instruments and institutional arrangements conducted prior to implementation these involved community consultation an attitudinal and behavioural survey experimental economics and the development of a transparent and credible monitoring protocol the conclusions drawn as a result of this analysis provided an empirical basis to implement the on ground trial phase results of on ground implementation are described finally the methods and results of a benefit cost analysis bca of the on ground trial implementation are outlined the bca accounted for salinity damage reduction forgone river flow carbon sequestration production benefits and costs the result of bca was an estimated net benefit

value learning and the willingness to accept willingness to pay disparity the assumption that individual preferences are rational and consistent with standard economic theory is often appropriate but may be optimistic if consumers are uncertain about either their preferences or how the market operates both sources of uncertainty may present themselves in lab experiments exploring the well known disparity between individuals willingness to accept and willingness to pay this paper explores the role of value uncertainty in the observed disparity and finds that providing subjects with a value learning opportunity can reduce the value disparity to insignificance

how deliberation affects stated willingness to pay for mitigation of carbon dioxide emissions an experiment respondents reported willingness to pay wtp for mitigating carbon dioxide emissions after structured group discussion or without this deliberation deliberation did not affect mean or median wtp but it increased the number of issues respondents considered with some issues becoming more frequently considered and others less survey only respondents considered issues relevant for responding to a request for a charitable contribution group mode participants considered issues relevant for a public policy assessment findings suggest that ordinary citizens can offer valid input to environmental policy decisions but that framing effects in ordinary wtp surveys may prevent them from providing such input

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

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

the causes of order effects in contingent valuation surveys an experimental investigation contingent valuation researchers have found that the hypothetical values respondents place on a nested sequence of environmental goods are sensitive to the order in which the goods are presented typically the smallest bundle of goods is valued more highly if presented first than if following more comprehensive bundles such effects appear even when each bundle is valued from an exclusive list or as an alternative to any other so that income and substitution effects are controlled we conduct lab experiments where participants are asked to value sequences of nested goods for purchase from an exclusive list using an incentive compatible becker degroot marschak mechanism we test whether order effects occur in valuation for a induced value goods b actual private goods and c identical private goods that are to be donated to charities we find significant order effects when the goods are valued for own use but not when they are valued for donation

reliability of individual valuations of public and private goods choice consistency response time and preference refinement we examined the reliability of a large set of paired comparison value judgments involving public goods private goods and sums of money as respondents progressed through a random sequence of paired choices they were each given their response time decreased and they became more consistent apparently fine tuning their responses suggesting that respondents tend to begin a hypothetical value exercise with relatively imprecise preferences and that experience in expressing preference helps reduce that imprecision reliability was greater for private than for public good choices and greater for choices between a good and a monetary amount than for choices between two goods however the reliability for public good choices was only slightly lower than for the private goods published by elsevier b v

foreign direct investment and investment under uncertainty we show that in uncertain environments ownership and internalization advantages may be negatively rather than positively associated with fdi this reversal from extant theory occurs because ownership advantages often serve to make fdi delayable while internalization advantages often serve to make it less reversible when fdi becomes either more delayable or less reversible it is less likely to occur at a point in time our approach enriches the who where and why explanations offered by current fdi theory to incorporate the question of when

towards a fair constructive and consistent criticism of all valuation languages comment on kallis et al 2013 we provide critical notes to the paper by kallis et al 2013 on monetary valuation we evaluate the four criteria they propose for assessing valuation studies we argue that no clear distinction is made between monetary valuation and pricing instruments the selected criteria are more relevant to assessing policy than monetary valuation the examples provided are not representative of the diversity of valuation studies encountered in the literature moreover no clear examples are provided of where valuation and associated cost benefit analysis of environmental policy go wrong we plea for a more fair constructive and consistent criticism of all valuation languages and offer relevant issues for consideration

independent private value auctions bidder behaviour in first second and third price auctions with varying numbers of bidders the symmetric equilibrium of third price auctions is characterized it makes a number of contrasting predictions relative to firms and second price auctions bids exceed private values the marginal effects on bids of an increase in private values is greater than one increasing numbers of bidders reduces bids and risk aversion requires bidding below the risk neutral nash equilibrium in the experiment bidders do not always satisfy the point predictions of the theory however the game theoretic models correctly anticipate at least directionally the important effects of the price rule changes copyright 1993 by royal economic society

testing preference formation in learning design contingent valuation using advance information and repetitive treatments policymakers have largely replaced single bounded discrete choice valuation by the more statistically efficient repetitive method double bounded discrete choice and discrete choice experiments repetitive valuation permits classification into rational and irrational preferences 1 a priori well formed 2 consistent nonarbitrary values discovered through repetition and experience 3 consistent but arbitrary values as shaped by preceding bid level and 4 inconsistent and arbitrary values policy valuations should demonstrate behaviorally rational preferences we outline novel methods for testing this in double bounded discrete choice experiments applied to renewable energy premiums in chile

is inflation persistence different in reality this study examines the inflation persistence using both online and official price indexes in argentina brazil china japan germany south africa the uk and the us using fractional integration technique the main results suggest that the degree of persistence estimated by the long memory parameter is smaller when using online price indexes believed to be a more realistic measure of inflation mainly in the cases of argentina brazil china and the uk monetary policy implications are discussed

market experience eliminates some anomalies and creates new ones we report two experiments which investigate whether experience of decision making in repeated markets purges behaviour of preference reversals we investigate two behavioural mechanisms that may be shaping bids in repeated auctions a tendency to adjust bids towards previously observed market prices and a tendency to reduce bids following bad market outcomes we find little support for the former but strong support for the latter also whilst just enough market exposure eliminates the typical preference reversal phenomenon continued exposure fosters the mirror image anomaly therefore although market experience shapes behaviour in our experiments it does not generally promote consistency with standard preference theory

price information and bidding behavior in repeated second price auctions examining panel data on bidding behavior in over forty second price auction markets with repeated trials we observe that i posted prices influence the behavior of the median naive bidder ii posted prices do not affect the behavior of the median experienced bidder or the bidder for familiar goods and iii anticipated strategic behavior wanes after two trials the results suggest that while affiliation might exist in auctions for new goods the repeated trial design with nonprice information removes the correlation of values and provides the experience that bidders need to understand the market mechanism

choice certainty and consistency in repeated choice experiments the main objective of this study is to examine how repeated choice affects preference learning in stated preference experiments we test different hypotheses related to preference learning by analyzing response patterns and asking respondents in a choice experiment to report their experienced certainty when going through the choice tasks in a split sample test we show that follow up choice certainty questions are procedural invariant the self reported certainty results indicate that learning occurs but econometric testing procedures do not identify any significant impact of learning effects on parameter estimates or variance across choice tasks additional tests of choice consistency suggest that preferences in the choice experiment are stable and coherent

valuing cultural heritage in developing countries comparing and pooling contingent valuation and choice modelling estimates a substantial part of the united nation s world heritage sites whss can be found in developing countries but many of them are in a bad state thus there is a need to document the social benefits of these global goods in order to justify the costs of restoration and preservation programmes rpps this study adds to the scarce literature on economic benefits of whss in developing countries and reduces the need to perform very uncertain benefit transfers from european or us valuation studies we apply contingent valuation cv and choice modelling cm to estimate the social benefits of rpps for the my son world cultural heritage site in vietnam both to foreign visitors and the local residents we then compare the estimates from the cv and cm methods and pool the results from the two methods the results show that both cv and cm are suited to estimating the economic benefits of preserving cultural heritage of my son the two methods produce very similar results which can be interpreted as a test of convergence validity the pooling results give evidence to show that the cv and cm models have the same underlying preference structures thus these valuation models can be successfully used in cost benefit analyses to assess the benefits to cultural heritage of measures to reduce air pollution soil erosion climate change and other causes to deterioration of cultural heritage sites

5 information impact and allocation rules in auctions with affiliated private values a laboratory study in affiliated private value auctions each bidder has perfect information regarding his her own value for the object at auction but higher values of the item for one bidder make higher values for other bidders more likely we report on a series of experiments examining three key implications of these auctions i in a first price auction public information about rivals values increases expected revenue ii an english auction increases expected revenue compared to a first price auction and iii a second price auction is isomorphic to an english auction in examining these issues we compare predictions of some ad hoc bidding models with nash equilibrium predictions in the first price auction experiments nash equilibrium bidding theory organizes the data better than either of two ad hoc bidding models public information about others valuations does increase average revenue but the increase in revenue is smaller and less reliable than predicted under risk neutral nash equilibrium bidding lower average revenue might be attributed to risk aversion while the high variability is attributed to a sizable frequency of individual bidding errors relative to the theory bidding theory precisely organizes english auction outcomes after a brief initial learning period the dominant strategy equilibrium does not organize second price auctions nearly as well as market prices persistently exceed predicted prices the difference between english and second price outcomes is attributed to effects of different information flows inherent in the structure of the two institutions on eliminating bidding errors revenue impacts of these two institutions relative to a first price auction are examined in light of observed bidding patterns

do anomalies disappear in repeated markets there is some evidence that as individuals participate in repeated markets anomalies tend to disappear one interpretation is that individuals particularly marginal traders are learning to act on underlying preferences which satisfy standard assumptions an alternative interpretation the shaping hypothesis is that individuals preferences are adjusting in response to cues given by market prices the paper reports an experiment designed to discriminate between these hypotheses with particular reference to the disparity between willingness to pay and willingness to accept

testing different stochastic specificationsof risky choice the harless camerer hc hey orme ho and random preference rp models of stochastic variation in choice under uncertainty are compared implications of these models including some that are independent of the deterministic theory with which they are combined are tested in an experiment in which participants respond to decision problems twice the hc model generally performs poorly the ho model predicts more violations of dominance than are observed while the rp model fails to account for those few violations which do occur additional regularities are observed which are inconsistent with all three models when combined with expected utility theory

reference dependent subjective expected utility abstract a reference dependent generalisation of subjective expected utility theory is presented in this theory preferences between acts depend both on final outcomes and on reference points which may be uncertain acts it is characterised by a set of axioms in a savage style framework a restricted form of the theory separates attitudes to end states encoded in a satisfaction function from attitudes to gains and losses of satisfaction given weak additional assumptions the restricted theory excludes cycles of choice explains observed disparities between willingness to pay and willingness to accept valuations of lotteries and predicts preference reversal

continuous attribute values in a simulation environment offshore energy production and mid atlantic beach visitation abstract there is a large and growing offshore energy distance siting disamenity literature we offer a new approach to understanding public preferences for renewable wind turbine and conventional oil platform siting which uses an original stated preference response choice in the form of distance rather than referendum style willingness to pay distance preference data are collected from beach visitors and analyzed in part by adapting a duration model where time is modeled as distance at which utility indifference occurs the results show that the public consists of two highly contrasting groups one large group that views wind turbines as a substantial disamenity while another large group views them as an amenity when pooled these groups tend to wash out their impacts revealing that average preference results suggesting that wind turbines might not be amenities or disamenities however when viewed in this new model one finds that policy is much more complicated and no single siting strategy far or close will satisfy the public because the two main groups have largely irreconcilable preferences

gender specific starting point bias in choice experiments evidence from an empirical study abstract in this paper we test whether preferences and willingness to pay estimates obtained in a choice experiment study are susceptible to starting point bias as is often the case in dichotomous choice contingent valuation studies on the basis of a multinomial probit model we find that preferences are indeed susceptible to starting point bias in a split sample design our results suggest that varying the price levels displayed in a so called instructional choice set presented prior to the actual preference eliciting choice sets significantly impacts respondents preferences and willingness to pay for protecting danish nature areas from new motorway development in particular our results show that the bias is gender specific only female respondents are significantly affected results further reveal that the impact of the starting point bias decays as respondents evaluate more and more choice sets this supports the discovered preference hypothesis and on the basis of this we suggest a number of ways to potentially mitigate the starting point bias

response strategies and learning in discrete choice experiments this study explores ordering effects and response strategies in repeated binary discrete choice experiments mechanism design theory and empirical evidence suggest that repeated choice tasks per respondent induce strategic behaviour we find evidence that strategic opportunities provided by the order in which choice sets are presented to respondents affect choice decisions strategic response the results suggest however that respondents may solely respond to high cost rather than low cost inconsistencies that is respondents are more cost sensitive and thus have a lower willingness to pay wtp if the same or a similar level of provision was offered in a previous choice set at a lower cost than if it was not yet the cost sensitivity and thus wtp remains unaffected if the same or a similar level of provision was offered in a previous choice set at a higher cost our findings further indicate that cost sensitivity increases and thus wtp decreases when respondents progress through the choice task with this increase decrease lessening as more choice questions are answered possible explanations are value learning and strategic learning

a calibrated auction conjoint valuation method valuing pork and eggs produced under differing animal welfare conditions this paper develops a valuation method which generates consistent and systematic estimates of people s preferences for complex multi attribute goods by inextricably linking auction bids with conjoint ratings the advantage of the valuation approach is that it permits the estimation of people s values for many potential goods allows one to decompose people s values for a good into its sub components and permits the study of preference heterogeneity without distributional assumptions we apply the method to an important and increasingly controversial topic animal welfare the method is used to determine people s preferences for eggs and pork produced from different production systems data from experiments conducted in three diverse u s locations chicago il dallas tx and wilmington nc indicates that people are on average willing to pay 0 95 more for a dozen eggs raised in an aviary pasture system vs a cage system and are willing to pay 2 02 more for two pounds of pork chops raised in a pasture system as opposed to a crate system

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

the effects of changing cost vectors on choices and scale heterogeneity choice experiments ce are widely used to estimate the values of changes in non market goods and services a cost attribute is typically included in a ce questionnaire to enable the estimation of monetary values for changes in the non market attributes presented notwithstanding the central importance of the cost attribute relatively little research has been undertaken on the impacts of varying cost attribute levels on value estimates or on individual heterogeneity in this paper i present results from mixed logit and generalised mixed logit models that account for unobserved idiosyncratic preference and scale heterogeneity respondents are found to anchor their choices on the relative cost levels presented in the survey with results suggesting that people are more sensitive to relative rather than absolute cost vectors however the higher cost levels do not lead to significantly higher value estimates partly because of observed preference heterogeneity towards the environmental attributes an important observation is that scale heterogeneity is important accounting for scale as well as preference heterogeneity in the generalised mixed logit model leads to significantly improved model fit the results indicate significant unobserved error variance across respondents unrelated to whether a high or low cost vector is used

exploring preference anomalies in double bounded contingent valuation double bounded dichotomous choice dbdc contingent valuation offers increased efficiency of willingness to pay wtp estimates compared with the single bounded format however evidence suggests dbdc generates anomalous respondent behaviour this paper provides the first investigation and explanation of these anomalies in health results suggest the incentives for truthful preference revelation are altered in the presence of a follow up question this result is found using both regression techniques and analysis of raw responses although findings suggest very certain respondents exhibit less anomalous behaviour inconsistencies remain across bounds the results of this study question the use of iterative valuation formats

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

an experiment in the demand revealing process the principal findings of this experiment are it is somewhat time consuming but not otherwise difficult to employ the demand revealing process in groups of 10 to 60 the ability of the demand revealing process to take account of intensities of preferences is appreciated by many of the persons who have used the process but the departure from one man one vote is strongly resisted by others the outcomes reached by demand revealing differed from majority rule in about one tenth of the cases the improvement in efficiency associated with these reversals of majority rule was 2 25 percent of the net benefit of making the efficient decisions the clarke taxes which would decline in percentage terms as group size increased were 3 04 percent of the net value of efficient decisions for the decisions studied

auction institutional design theory and behavior of simultaneous multiple unit generalizations of the dutch and english auctions historically english and dutch auctions have been used for the exchange of single objects such as works of art or single lots of a good such as produce fish or cut flowers where these institutions have been used for the exchange of multiple units such as the australian wool auction using english rules successive lots of the good are sometimes sold sequentially at auction in some but not all instances this is because the goods are not identical even though the various lots may be close substitutes see penny burns 1985 where the goods are accepted universally as being homogeneous as in the securities markets multiple units are often commonly auctioned simultaneously in the securities industry orders are batched for simultaneous execution in multiple unit auctions in what are referred to as call markets that is the security is called for auction at a particular point in time this type of market is used on the stock exchanges of austria belgium france germany and israel some of these are verbal and some are sealed bid auctions although the u s organized exchanges are predominantly continuous rather than call markets except that call markets are used each day to open trading in each listed security there is a growing number of exceptions such as the proliferation since 1984 of auction preferred stock goldman sachs and co october 1984 and money market preferred stock lehman brothers july 1984 we now have dutch auction rate transferable securities called darts stated rate auction preferred stock or straps and many more after the initial subscription offering of this type of security the market is called every 49 days to reset the preferred dividend rate using a multiple unit auction the exchange of shares and the dividend determination is based on the array of stated dividend rates at which existing holders and potential new holders are willing to sell and or buy corresponding quantities the dividend rate and exchange of shares every 49 days is executed using the uniform price or competitive sealed bid mechanism vernon l smith et al 1980 the discussion to follow will be confined to this sealed bid form of the call market call markets provide temporal consolidation of trade orders or other forms of expressing the desire to buy and sell by comparison with continuous trading call markets offer both advantages and disadvantages robert a schwartz 1988 pp 442 6 the cited advantages include low cost of operating the exchange information aggregation and presumed pricing efficiency price stability individual trades which are thought to have a small impact on price reduced price uncertainty and finally nondiscriminatory pricing however there are offsetting disadvantages 1 the market is inaccessible except at the time of call 2 no bid offer contract or price information is available until the results of the call are announced and 3 there is transaction uncertainty because a submitted bid offer may be too low high to execute inside the supply demand cross these conditions are only partially alleviated if there is a secondary market between calls these disadvantages may be significant in september 1988 the wall street journal published an article on the failure of a call market for the auction rate preferred stock economic science laboratory university of arizona tucson arizona this material is based upon work supported by the national science foundation under grant no ses 8320121

contingent valuation of community forestry programs in ethiopia controlling for preference anomalies in double bounded cvm this study examines the welfare effects of community plantations in ethiopia via contingent valuation both single bounded and double bounded survey methods were considered and with respect to double bounded methods the potential for anomalous response behaviour was also taken into account the results generally confirm that there are statistically significant welfare benefits to be derived from community forestry however the range of the estimated benefits is large after controlling for anomalous response behaviour the range of estimated benefits narrows and our preferred estimates place the welfare gain between ethiopian birr etb 20 14 and 30 41 per household which is much lower than the estimated benefits without controlling for anomalous preference responses

tough and easy choices testing the influence of utility difference on stated certainty in choice in choice experiments respondents in stated preference studies may be uncertain about their preferences for the good presented to them inspired by wang j environ econ manag 32 219 232 1997 we hypothesize that respondents stated certainty in choice increases with the utility difference between the alternative chosen and the best alternative to that we test this hypothesis using data from two independent choice experiments both focusing on nature values in modelling respondents self reported certainty in choice we find evidence that the stated level of certainty increases significantly as utility difference in choice sets increases in addition stated certainty increases with income furthermore there is some evidence that male respondents are inherently more certain in their choices than females and a learning effect may increase stated certainty we find evidence of this in the first study where the good is described in rather broad and generic terms but not in the second study where a more specific description of the good is used

learning and fatigue effects revisited investigating the effects of accounting for unobservable preference and scale heterogeneity using multiple choice tasks per respondent in discrete choice experiment studies increases the amount of available information however respondents learning and fatigue may lead to changes in observed utility function preference taste parameters as well as the variance in its error term scale they need to be controlled to avoid potential bias a sizable body of empirical research offers mixed evidence in terms of whether these ordering effects are observed we point to a significant component in explaining these differences we show how accounting for unobservable preference and scale heterogeneity can influence the magnitude of observed ordering effects

firm ownership preferences and host government restrictions an integrated approach two approaches may explain how multinational enterprises mnes select ownership structures for subsidiaries the first argues that mnes prefer structures that minimize that transaction costs of doing business abroad the second argues that ownership structures are determined by negotiations with host governments whose outcomes depend on the bargaining power of the firm this paper presents a framework integrating these two approaches and uses statistical methods to separate their effects empirically

a critical assessment of the eclectic theory of the multinational enterprise the paper critically deals with the electric theory of the multinational enterprise it examines firstly the theoretical redundancy of the ownership advantage secondly the inseparability of the ownership advantage from the location advantage thirdly the conceptual ambiguity of the location advantage and lastly possible methodological dangers of a multi factor analysis under the three headings of the eclectic theory

international expansion of telecommunication carriers the influence of market structure network characteristics and entry imperfections this paper examines the internationalization process of telecommunication carriers in this industry early entrants gain substantial first mover advantages due to the transient nature of the windows of market opportunity and the potential to influence the regulatory process as an incumbent to capture these strategic and economic advantages firms follow a strategy of preemption both of markets and partners the authors argue for the need to augment prevailing theory with contextual idiosyncrasies that characterize specific industries

developments in non expected utility theory the hunt for a descriptive theory of choice under risk this article reviews recent developments in the economic theory of individual decision making under risk since the 1950s it has been known that individual choices violate the standard model of expected utility in predictable ways considerable research effort has now been devoted to the project of developing a superior descriptive model following an overview of non expected utility theories which distinguishes between conventional and non conventional approaches the paper seeks to assess these alternative models in terms of empirical success using laboratory and field data and theoretical usefulness the closing sections reflect on some new directions emerging in this literature

stability of willingness to pay for coastal management a choice experiment across three time periods a key assumption of stated preference methods is that individuals have well formed preferences that are robust over time both the discovered and constructed preference perspectives imply this is not necessarily the case there can be a large situational component to expressed preferences that add to the uncertainty of sampling error most non market valuation studies only collect data from one point in time so the degree of temporal variability cannot be tested test retest studies that provide data from two points in time generally find significant differences in preference structure and willingness to pay wtp in this study we test stability of wtp for beach erosion management using a fully ranked discrete choice experiment survey with not one but two retests over a six month period we find that stability does not improve with the additional repetition as the preference discovery hypothesis implies it might wtp confidence intervals overlap but the models are significantly different at each point in time even after allowing for variation in choice error either the survey did not facilitate sufficient preference discovery or preferences were reconstructed however respondents with high scores of self reported certainty in their choices in the first survey had significantly more stable wtp estimates

beyond rationality towards reasonableness enriching the theoretical foundation of deliberative monetary valuation economic valuation is often deemed an important source of information for land use decisions stated preference sp methods are a particularly potent class of economic valuation methods but they are also particularly controversial in response to accumulating criticism of sp deliberative monetary valuation dmv has been proposed as an alternative approach and has gained considerable attention in recent years however being a combination of elements from two theories neoclassical welfare economics and theory of deliberative democracy it lacks a convincing consistent theoretical foundation in our paper we propose some clarifying adjustments regarding rationality assumptions and aggregation issues by drawing upon the work of amartya sen we find that many of his ideas lead to a harmonisation of dmv s theoretical foundations e g meta rankings of preferences impartial spectator and the plurality of impartial reasons

learning design contingent valuation ldcv noaa guidelines preference learning and coherent arbitrariness we extend the contingent valuation cv method to test three differing conceptions of individuals preferences as either i a priori well formed or readily divined and revealed through a single dichotomous choice question as per the noaa cv guidelines k arrow r solow p r portney e e leamer r radner h schuman report of the noaa panel on contingent valuation fed reg 58 1993 4601 4614 ii learned or discovered through a process of repetition and experience j a list does market experience eliminate market anomalies q j econ 2003 41 72 c r plott rational individual behaviour in markets and social choice processes the discovered preference hypothesis in k arrow e colombatto m perleman c schmidt eds rational foundations of economic behaviour macmillan london st martin s new york 1996 pp 225 250 iii internally coherent but strongly influenced by some initial arbitrary anchor d ariely g loewenstein d prelec coherent arbitrariness stable demand curves without stable preferences q j econ 118 1 2003 73 105 findings reject both the first and last of these conceptions in favour of a model in which preferences converge towards standard expectations through a process of repetition and learning in doing so we show that such a learning design cv method overturns the stylised facts of bias and anchoring within the double bound dichotomous choice elicitation format

on the internationalization process of firms a critical analysis even though international marketing has been challenged because of theoretical and methodological shortcomings very few researchers have actually attempted to analyze the weaknesses based on principles of theory evaluation in this article the author examines two types of models addressing the individual firm s internationalization process a theory evaluation is performed based on the explanation and the falsification criteria in order to improve the internationalization models some measures are proposed

reducing gain loss asymmetry a virtual reality choice experiment valuing land use change abstract in the majority of choice experiments ces the attributes of non market goods are conveyed to respondents as a table of numeric and or categorical data recent research suggests that respondents may have difficulties evaluating data in this format in the context of a ce eliciting preferences for changes in coastal land use this study uses a split sample experiment to compare standard presentations with virtual reality vr visualisations conveying objectively identical information we find that compared to the standard presentation preferences elicited in vr treatments are less variable and exhibit a significant reduction in asymmetry between willingness to pay wtp for gains and willingness to accept wta for corresponding losses we conjecture that the greater evaluability of the vr presentation reduces respondent judgement error and moderates reliance on the loss aversion heuristic

preferences with and without prices does the price attribute affect behavior in stated preference surveys the experimental as well as the non market valuation literature include several examples of how an introduced price can affect behavior in otherwise not expected ways it has become standard to include a price vector as an attribute in choice experiments something that enables us to estimate a marginal willingness to pay for other attributes we test the impact on preferences by an inclusion of a price in a choice experiment preferences are affected as might be expected however also the relative ranking of individual attributes is affected

position dependent order effects on the prediction of consumer preferences in repeated choice experiments abstractusing stated choice data collected by experimental design with repeated choice tasks this study developed an approach to quantify the position dependent order effects on the prediction of

reconsidering the effect of market experience on the endowment effect simple exchange experiments have revealed that participants trade their endowment less frequently than standard demand theory would predict list 2003a finds that the most experienced dealers acting in a well functioning market are not subject to this exchange asymmetry suggesting that a significant amount of market experience is required to overcome it in order to understand this market experience eect we introduce a distinction between two types of uncertainty choice uncertainty and trade uncertainty both of which could lead to exchange asymmetry we conjecture that trade uncertainty is most important for exchange asymmetry to test this conjecture we design an experiment where the two treatments impact dierently on trade uncertainty while controlling for choice uncertainty supporting our conjecture we find that forcing subjects to give away their endowment in a series of exchanges eliminates exchange asymmetry in a subsequent test we discuss why markets might not provide sucient

changing with the tide semiparametric estimation of preference dynamics we contrast the discovered preference hypothesis against the theory of coherent arbitrariness in a split sample stated choice experiment on flood risk exposure a semiparametric local multinomial logit model is developed as an alternative to the swait and louviere 1993 test procedure controlling for preference dynamics within and between samples the proposed model supports the discovered preference hypothesis by means of a decaying starting point bias the swait and louviere 1993 test procedure reaches a different conclusion it rejects the assumption of stable preferences but most preference dynamics tend to be smoothed out causing a more erratic pattern of preference dynamics

asset markets as an equilibrium selection mechanism coordination failure game form auctions and tacit communication abstract in this paper we explore the possibility that asset markets provide a means of tacit communication which may allow subjects to coordinate on the payoff dominant equilibrium in an underlying coordination game we find that the existence of a market price for the right to play does communicate information about the equilibrium selection problem specifically behavior never converged to the efficient outcome when subjects were endowed with the right to participate but always converged to the efficient outcome when subjects purchased the right to participate journal of economic literature classification numbers c720 g120

willingness to pay and compensation demanded experimental evidence of an unexpected disparity in measures of value aside from possible income effects measures of the maximum amounts people will pay to avoid a loss and the minimum compensation necessary for them to accept it are generally assumed to be equivalent unexpectedly wide variations between these sums however have been noted in survey responses to hypothetical options this paper reports the results of a series of experiments that confronted people with actual money payments and cash compensations the results indicate that the compensation measure of value seems to exceed significantly the willingness to pay measure which would appear to call into some question various rules of entitlement damage assessments and interpretations of indifference curves

pre play learning and the preference reversal phenomenon elicited preference rankings for two lotteries are typically inconsistent across choice and pricing tasks we test whether pre play learning makes preference rankings consistent pre play learning denotes ex ante lottery learning where subjects observe playing lotteries before making decisions we find that pre play learning makes the average selling prices for the p bet of subjects who choose the p bet higher than their average selling prices for the bet however pre play learning is not strong enough to equalize the rates of standard and non standard reversals although pre play learning reduces the rate of standard reversals

preference refinement in deliberative choice experiments for ecosystem service valuation choice experiments have gained considerable popularity in ecosystem service valuation in a one shot survey respondents are faced with a strenuous task asking them to discover and monetize their preferences for often unfamiliar ecosystem services in a previously unknown hypothetical market situation we present a deliberative choice experiment that aims to generate well rationalized value estimates for policy advice two aspects of deliberation discussion and time to reflect are examined in terms of their effect on preference refinement we find more comprehensive choice motives after deliberation as well as indications for preference adjustment and a slight increase in choice certainty jel q51 q57

payoff dominance vs cognitive transparency in decision making i introduction there is a general question about how well laboratory markets work in eliciting true preferences given the low opportunity costs of making errors as in harrison 1989 vernon smith 1982 set out a series of conditions that must be adhered to if a laboratory market investigation is to provide insight into economic behavior in naturally occurring markets the opportunity cost question posed above is covered under smith s payoff dominance and reward saliency precepts for laboratory market experiments if the experimental setting is to elicit true preferences from the subjects the monetary payoffs in the experiment must be salient and dominate potential extraneous influences on subject behavior this paper reports on three series of experiments which employ the becker degroot marshak bdm mechanism to investigate the interaction between payoff dominance reward saliency and cognitive effort in the decision task the bdm mechanism is well suited to this task because it involves only individual choice is theoretically incentive compatible and offers a high degree of experimenter control over payoffs initial information and feedback on the results of decisions becker degroot and marschak 1964 introduced the following preference elicitation mechanism individuals state the most they would be willing to pay wtp 1 for a good then a random price is drawn from a distribution known to the individuals if the stated value is greater than or equal to the random price the individual buys the good at the randomly determined price otherwise the individual does not buy the good the bdm bidding mechanism can be shown to be incentive compatible the intuition is straightforward it is not in the individual s interest to understate true wtp if the random buying price falls between the stated wtp and the true wtp the individual has foregone a beneficial trade it is also not in an individual s interest to overstate true wtp if the random buying price is greater than the true value but less than the stated value the individual will be required to buy the good at a price greater than true wtp a more formal proof is easy to construct 2 let v the true value of one unit of the auction good b the bid submitted to purchase one unit of the good r the price randomly determined to be paid if the good is purchased p r probability that price r is randomly selected y sup o initial income u y utility a function of money income and the value of the good and e initial monetary balance provided in an experiment in the wtp version of the bdm auction the good is purchased if b greater than or equal to r with the subject paying only r and not purchased if b less than r in experiments using the bdm the subject cannot bid more than the experimental balance e so it must be that v less than e if the experiment is to be demand revealing assuming that subjects maximize expected utility they will submit bid b that maximizes eu integral of p r u y sup o e v r dr between limits b and 0 integral of p r u y sup o e dr between limits e and b the first integral describes the expected payoff for random prices r below the bid b and the second integral describes the expected payoff for random prices between the bid b and the maximum possible bid as limited by the balance e the maximum over b occurs when the derivative of eu with respect to b is zero in other words when deu db p b u y e v b u y e 0 so long as p b greater than 0 i e there is some probability the offered bid will be the price the above implies that the maximum occurs when b v in other words it is individually optimal to submit a bid b equal to one s true value v for the commodity although the bdm is incentive compatible in theory it is an empirical question whether it has this property in practice