asymmetries in ordered strength of preference models implications of focus shift for discrete choice preference estimation this paper explores potential focus shift asymmetries in an ordered strength of preference model applied to contingent choice data a focus shift occurs when respondents weight factors differently when assessing preference for an accepted scenario than they do when assessing preference for a rejected scenario and may imply that respondents do not refer to a single underlying preference function using data drawn from a survey which addressed preferences for watershed management the model results identified focus shift asymmetries in the ordered strength of preference model the paper discusses implications for policy survey design and discrete choice preference estimation

willingness to pay for land preservation across states and jurisdictional scale implications for benefit transfer in stated preference valuation of farmland preservation respondents are often told that preservation will occur within various jurisdictional scales that is community or state but are not told the specific location of parcels the resultant availability of welfare estimates for different scales and regions provides numerous avenues for benefit transfer this paper provides a systematic assessment of transfer error contrasting different methods for the transfer of farmland preservation values across states and jurisdictional scales results drawn from multistate choice experiments suggest that the choice of across scale versus across state transfer method can have significant implications for transfer validity

estimating distributions of willingness to pay for heterogeneous populations random parameters logit models have emerged as a standard approach in estimating public preferences for a range of goods and services however to simplify calculation of welfare measures the marginal utility of income is often assumed to be constant across the population we show that by shifting distributional assumptions from marginal utilities to the welfare measures themselves a random parameters version of a censored logistic regression model cameron 1988 yields distributions of welfare measures more directly and without imposing any unnecessary assumption on the marginal utility of income we develop the theoretical framework for the model and apply it to contingent choice survey data for siting a noxious facility in rhode island in this application our proposed model and random parameters logit yield similar mean willingness to pay but welfare measures are more readily interpretable in the proposed model

an experimental approach to valuing new differentiated products abstract an experimental store was created to evaluate initial demand for locally produced and guaranteed tender steak products as a more realistic alternative to contingent valuation cv and dichotomous choice experimental methods strengths of the approach are incentive compatibility a realistic consumption set and a familiar choice environment consumers selected among usda choice premium quality lean guaranteed tender and locally produced strip steaks a double hurdle count data model indicated initial willingness to pay wtp for locally produced steak comparable to prior cv results but demand was highly elastic demand for premium quality steak crowded out demand for the guaranteed tender product contrasting with prior dichotomous choice experimental results

do respondents adjust their expected utility in the presence of an outcome certainty attribute in a choice experiment in a stated preference valuation survey the expected benefits of environmental policies are generally presented to respondents without reference to the fact that the predicted outcomes are rarely known with certainty this omission may reduce the credibility of the valuation scenario and contribute to hypothetical bias in the study outlined in this paper a choice experiment was conducted to elicit values for environmental improvements in the great barrier reef australia with outcome certainty included as a separate attribute different specifications of the utility functions which imply different behavioural assumptions about the way choices have been made generate variations in value estimates results showed that respondents incorporate outcome certainty into their decisions but that an expected utility formulation represented by the interaction between environmental protection and likelihood of occurrence underestimated environmental values some environmental protection values appear to be independent of outcome certainty which may be consistent with existence values and other non use categories a partial expected utility model is cautiously recommended

a new paradigm for valuing non market goods using referendum data maximum likelihood estimation by censored logistic regression abstract this paper challenges the w m hanemann amer j agr econom 66 332 341 1984 and c sellar j p chavas and j r stoll j environ econom management 13 382 390 1986 utilizations of logit models to estimate the value of non market resources from referendum survey data these data are more informative than conventional choice data the random utility interpretation of logit models is therefore too restrictive bypassing the utility function entirely it will be shown that parameters and standard errors for utility theoretic inverse hicksian demand functions can be extracted directly and much more simply estimated demand functions need not be limited to those corresponding to the linear in parameters utility difference specifications which can be handled by packaged logit programs

unraveling the choice format effect a context dependent random utility model a few recent studies report that preferences elicited from a two alternative choice format are different from those elicited from a three alternative choice format when both choice set designs contain a status quo option we hypothesize that the choice format effect might disappear when we estimate a random utility model rum that allows for context dependent preferences based on the estimated context dependent rum we find that the choice format effect is likely the result of two offsetting effects a task complexity effect that increases the probability of choosing the status quo option and a preference matching effect which decreases the probability

decision making when choices are complex a test of heiner s hypothesis this paper explores heiner s hypothesis concerning a gap between the cognitive ability of decision makers and the difficulty of decisions the c d gap we discuss the implications of decision heuristics for coefficient estimates when uncertainty is faced by decision makers where the level of uncertainty varies with complexity statistical analysis strongly supports the presence of a c d gap and provides evidence supporting the use of decision heuristics the results of both direct and indirect methods suggest that mixed decision strategies may be used we also find that complexity effects can have important implications for welfare analysis

exact consumer s surplus and deadweight loss consumer s surplus is a widely used tool in applied welfare economics both economic theorists and cost benefit analysis often use consumer s surplus despite its somewhat dubious reputation the basic idea is to evaluate the value to a consumer or his willingness to pay for a change in price of a good from say pricep to pricep because price changes affect consumer welfare an evaluation of this effect is often a key input to public policy decisions yet consumer s surplus is probably the most controversial of widely used economic concepts both paul samuelson and ian little conclude that the economics profession would be better off without it it is my feeling of the situation that substantial agreement exists on the correct quantities to be measured the amount the consumer would pay or would need to be paid to be just as well off after the price change as he was before the price change the quantities correspond to john hicks compensating variation measures an alternative measure which takes ex post price change utility as the basis of comparison is hicks equivalent variation the controversy arises in the measurement of these quantities the usual measurement procedure is to use the area to the left of the marshallian market demand curve between two price levels jules dupuit originated this measure of welfare change and alfred marshall and hicks derived appropriate conditions for its use the primary condition for the area to the left of the demand curve to correspond to the compensating variation is to have constant marginal utility of income marshall gave this condition and if it holds the same quantity will be derived as the area to the left of the compensated hicksian demand curve this area to the left of the compensated demand curve is exactly what the compensating variation and equivalent variation measure thus the constant marginal utility of income is a sufficient condition for marshallian consumer s surplus to be equal to hicks consumer s surplus in this case arnold harberger s plea to use the welfare triangle as one half times the product of the price change times the quantity change to measure deadweight loss corresponds to the correct theoretical amount of welfare change in a recent paper robert willig derives bounds for the percentage difference between the correct measure of either the compensating or equivalent variation and the marshallian measure derived form the market demand curve his bounds which depend on the income elasticity of demand for the single good in the region of price change being considered as well as the proportion of the consumer s income spent on the good demonstrate that the marshallian consumer s surplus is often a good approximation to hicks consumer s surplus the fact that the proportion of the consumer s income spent matters as well as the income elasticity was first pointed out by harold hotelling willig contends that the approximation error will be less than the errors involved in estimating the demand curve thus he hopes to remove the need for apology that applied economists often need to give to theorists who remark on the inappropriateness of using marshallian consumer s surplus to measure welfare change however in this paper i show that for the case primarily considered by willig of a single price change which is also the situation in which consumer s surplus is often used in applied work no approximation is necessary professor of economics massachusetts institute of technology and research associate national bureau of economic research i would like to thank peter diamond erwin diewert daniel mcfadden robert merton robert solow hal varian joel yellin and the referees for help and comments research support from the national science foundation is acknowledged the reason that we still have two rather than one of samuelson s six measures of consumer s surplus arises from an index number problem of the correct basis for the welfare comparison i will give both measures but plan to concentrate on the compensating variation

strength of preference indicators and an ordered response model for ordinarily dichotomous discrete choice data abstract recent environmental regulations raise the importance of accurate survey based methods to estimate environmental values while interviewing costs stimulate research to improve dichotomous choice survey methods this paper proposes using strength of preference indicators along with dichotomous contingent response data we model strength of preference indicators as quasi cardinal measures using an ordered response model we find that strength of preference indicators provide substantial efficiency gains while increasing respondents effort minimally with evidence that interpersonal comparison of preference ratings induces no bias the ordered response model of utility and willingness to pay is superior even in predicting the binary choice results

lexicographic preferences in contingent valuation a theoretical framework with illustrations this paper considers some implications of l ordering an incommensurable preference model proposed in earlier cvliterature the structure and existence of inverse demand functions is shown to be a function of three elements the relationship between goods and wants wta wtp formats and the endowment of the good in a many to many relationship uncompensated and even compensated inverse demand functions may exist whereas a one to one relationship implicitly assumed in earlier literature does not necessarily produce either an illustration is provided in support of the theoretical framework especially the hypothesis that one to one relationship and high share of cv responses revealing lexicographic preferences are correlated

choice modelling approaches a superior alternative for environmental valuation in this paper we examine some popular choice modelling approaches to environmental valuation which can be considered as alternatives to more familiar valuation techniques based on stated preferences such as the contingent valuation method a number of choice modelling methods are consistent with consumer theory and its focus on an attribute based theory of value permits a superior representation of many environmental management contexts however choice modelling surveys can place a severe cognitive burden upon respondents and induce satisficing rather than maximising behavioural patterns in this framework we seek to identify the best available choice modelling alternative and investigate its potential to solve some of the major biases associated with standard contingent valuation we then discuss its use in the light of policy appraisal needs within the eu an application to the demand for rock climbing in scotland is provided as an illustration

evaluating impacts from noxious facilities including public preferences in current siting mechanisms abstract this paper describes an approach to facility siting that ranks potential sites in terms of their social impacts a contingent choice survey based on paired comparisons is used to construct a utility index to rank sites consistent with predicting results of a hypothetical referendum based on the attributes of the sites the method is likely to be acceptable to public decision makers since it is analogous to site scoring methods that have been commonly used indeed our approach is currently being employed as part of a larger landfill site selection process in the state of rhode island

a latent class approach to investigating demand for genetically modified banana in uganda this study explores consumer acceptance and valuation of a genetically modified gm staple food crop in a developing country prior to its commercialization we focus on the hypothetical introduction of a disease resistant gm banana variety in uganda where bananas are among the most important staple crops a choice experiment is used to investigate consumer preferences for various attributes related to the banana such as bunch size technology producer benefit and price and examine their opinions on gm foodstuff choice data come from 421 banana consuming households randomly selected from three regions of uganda a latent class model is used to investigate the heterogeneity in consumers preferences for selected attributes related to the banana and to profile consumers who are more or less likely to accept gm bananas our results reveal that there is significant heterogeneity in consumer preferences across our sample gm bananas are valued the most by poorer households located in the rural areas of the eastern region these food insecure households would experience the highest benefits i e welfare gains from the commercial release of gm bananas in contrast urban consumers are less accepting of gm bananas and they would experience significant welfare losses if gm banana is released according to our welfare estimates both the total welfare benefits acquired by the gainers and the total welfare losses borne by the losers of this technology are significant and large these results suggest the need for further investigation of the overall welfare effects of the introduction of gm bananas on the ugandan society as a whole

the impact of offering two versus three alternatives in choice modelling experiments researchers designing choice modelling experiments have some latitude over the number of choice alternatives that can be offered in each choice set there is some evidence that design dimensions including the number of alternatives available in each choice set can influence model outcomes a key issue is whether referendum formats with binary options are preferable to choice sets with multiple alternatives a choice modelling experiment was performed where questionnaires delivered to two split samples differed only according to whether two or three alternatives were offered to respondents in each choice set the results indicate that more robust models could be constructed from the three alternative split compared to the two alternative split one reason for the difference is that respondents tended to display serial non participation in the two alternative format choosing an alternative consistently without regard for changes in the attributes for practitioners of the cm technique the results suggest that it may be preferable to offer more than two alternatives in a choice set that includes a status quo option

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

the self selection of complexity in choice experiments we investigate whether individuals will voluntarily increase the complexity of the tasks they complete within a discrete choice experiment dce we do this via a self selection of complexity design in which respondents choose whether to face choice sets comprising 3 4 or 6 alternatives we link this approach with the emerging excessive choice effect ece literature we find that 30 of the sample opt for the largest sets we test whether this choice of complexity reveals information about respondents capability commitment we find that it does since those with lowest initial error variance levels are most likely to later select the highest level of task complexity we argue that this result offers insights regarding the design of more cognitively efficient dce designs we consider the matching of respondents to the appropriate level of task complexity as analogous to the principal agent problem with asymmetric information rather than trying to understand respondents cognitive capability or commitment ex ante we propose that participants self select designs that achieve the researcher s objective of minimizing error variance copyright 2012 oxford university press

fiscal stabilization policy and fiscal institutions in this paper we analyse counter cyclical fiscal policy within the context of a microfounded analysis of business cycle stabilization we show that tax and spending instruments can have a useful counter cyclical role even after allowing for the distortionary nature of the instruments and the need for debt sustainability a critical barrier to the use of fiscal instruments may be political economy concerns and we survey recent suggestions involving alternative fiscal policy institutions

designing choice sets for stated preference methods the effects of complexity on choice consistency abstract we vary the complexity of choice sets used in stated preference methods to evaluate the impact on choice consistency we define five measures of complexity that capture either the amount of information or the correlational structure of information in a choice set using these measures as randomly assigned treatments in a large experiment we analyze the consistency of respondents choices using a heteroskedastic multinomial logit model we find that i all of our measures of choice set complexity affect choice consistency ii changes in the correlational structure of information have the largest impact on choice consistency and iii choice complexity significantly distorts welfare estimates our results confirm economists initial worry that moving from contingent valuation to conjoint methods will increase complexity induced choice inconsistency however our analysis also shows that these negative impacts may be mitigated if precautions are taken at the design and estimation stages of stated preference methods

electoral systems and institutional choice a case study of the 1988 korean elections this article shows how the ruling party of korea the djp chose and implemented a strategy to win the 13th national assembly election of 1988 and explains why that strategy failed in addition this election is analyzed in a more general context the authors find for example that the preference of a party over electoral systems is determined by the spatial distribution of its votes and that the choice of an electoral system is the outcome of a bargaining process among the parties in the context of democratization the korean experience shows that the democratic reform policies of an authoritarian government are shaped by the interplay between the ruling party s desire to create a political system wherein they maintain power and the constraints to create a system that would channel the opposition s activities into electoral or institutional outlets

causes and consequences of lexicographic choices in stated choice studies abstract stated choice sc methods and other choice experiments are now becoming increasingly popular for the valuation of environmental goods this paper shows that lexicographic choices lcs in an sc task or other types of choice experiments do not imply that the respondent has lexicographic preferences lcs may be a result of i study designs where differences between the alternatives are too great and ii simplification of the choice task a traditional approach that investigates motives for lexicographic choices mainly as a result of lexicographic preferences may therefore fail to reveal the whole motive range study designs that cause lcs whether such choices actually are based on non compensatory choices i e genuine lexicographic preferences or strategic behaviour or compensatory choices provide less information about preferences however providing they are not totally dominant such choices are not normally a serious modeling problem it is argued that simplification is a consequence of respondents differing abilities to choose such lcs contribute to the larger variances of sc data relative to less cognitively demanding valuation methods and might therefore have a significant impact on the implied valuation of non market goods if they are not handled in the analysis in data collection we should use survey designs that collect more signals and less noise and in data analysis we should use models that can separate signals from noise however there is obviously a limit to the amount of noise which can be separated from signals in a model and therefore how much noise such models can tolerate and still produce useful valuation estimates for the goods under consideration for further investigation of such limits a direct test procedure that can investigate whether each respondent has completed the task in a compensatory manner like the one presented in the current study is valuable

the impact of choice inconsistencies in stated choice studies a new test procedure revealing mutuallyinconsistent choices has been developed andapplied to stated choice data our analysisshows that inconsistent choices commonly occurin several stated choice tasks an applicationof the test to the norwegian value of timestudy data shows that failing to excludeinconsistent choices resulted in asubstantially higher value of time theinconsistent choices were made by less educatedparticipants as the tasks were undertaken inthe easy context of choosing travelalternatives with three attributes practitioners of more complex and cognitivedemanding designs should be particularilyconcerned with these results

generating electricity with forest biomass consistency and payment timeframe effects in choice experiments abstract this paper presents a choice experiment analyzing the consumers preferences towards a policy for replacing conventional electricity with electricity generated from forest biomass the results show that consumers specially prefer the effects related to the lower risk of forest fires and to the decrease in pressure on non renewable resources the article also presents a methodological test in relation to the payment timeframe and its effect on marginal willingness to pay and consistency of responses using choice experiments the most frequent and realistic payments are associated with lower presence of inconsistent responses finally we cannot reject the null hypothesis of no effects of payment timeframe on marginal willingness to pay