should reference alternatives in pivot design sc surveys be treated differently analysts are increasingly making use of pivot style stated choice sc data in the estimation of choice models these datasets often contain a reference alternative whose attributes remain invariant across replications for the same respondent this paper presents evidence to suggest that respondents react differently to the attributes of these reference alternatives and those of purely hypothetical alternatives while some such evidence has been reported in the existing literature this paper goes further and details a number of different departures from a common treatment of the two types of alternatives relating both to the observed part of utility and the error term

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

limited liability and incentive contracting with ex ante action choices abstract this article examines a principal agent model of financial contracting in which a risk neutral entrepreneur agent makes an unobservable ex ante effort choice while employing the investment funds of a risk neutral investor principal the key innovation is that the investment contract is subject to statutory liability limits given these liability limits two settings are considered one in which the investor payoff function is also constrained to be monotonically nondecreasing in firm profit and another in which no such monotonic contract constraint is imposed in the former case a standard debt contract is shown to emerge and a first best effort choice is not achieved in the latter setting the optimum is characterized by a live or die payoff function and a first best effort level may or may not be realized

multitask agency and contract choice an empirical exploration the multitask agency problem is examined empirically using contracts between private integrated oil companies and their service stations in the city of vancouver the empirical tests assess how variations in the characteristics of one task affect the choice of agent compensation scheme for another comparative statics from the model predict that higher powered incentives will be offered for gasoline sales when the secondary activity is not highly complementary with gasoline retailing where complementarity is measured by the cross price demand effect the covariation in uncertainty and the degree of effort substitutability copyright 1996 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

conflicting tasks and moral hazard theory and experimental evidence abstract we study a multi task principal agent problem in which tasks can be in direct conflict with each other in theory it is difficult to induce a single agent to exert efforts in two conflicting tasks because effort in one task decreases the success probability of the other task we have conducted an experiment in which we find strong support for the relevance of this incentive problem in the presence of conflict subjects choose two efforts significantly less often when both tasks are assigned to a single agent than when there are two agents each in charge of one task

benefit estimates for landscape improvements sequential bayesian design and respondents rationality in a choice experiment a multi attribute stated preference approach is used to value low and high impact actions on four major landscape components addressed by the rural environment protection scheme in ireland several methodological issues are addressed the use of prior beliefs on the relative magnitudes of parameters standardized description of different levels of landscape improvements via image manipulation software adoption of efficiency increasing sequential experimental design and sensitivity of benefit estimates to inclusion of responses from irrational respondents results suggest that bayesian design updating delivers significant efficiency gains without loss in respondent efficiency and estimates are upward biased when irrational respondents are included

nonparametric analysis of technical pure technical and scale efficiencies for food crop production in east java indonesia abstract nonparametric analysis of technical efficiency for irrigated farms in the madiun regency in the west central part of east java indonesia is conducted using linear programming techniques this procedure allows the relative technical efficiency for each farm to be determined and for inefficiencies to be decomposed into pure technical inefficiency and scale inefficiency and does not require restrictions or assumptions regarding functional form to be placed on the data farmers in madiun generally are efficient relative to each other farmers operating inefficiently do so more often because of scale inefficiencies rather than pure technical inefficiencies a majority of the farms operate in the region of decreasing returns to scale rather than increasing returns to scale farmer age the level of diversification of cropping activities and high school education were found to be related to technical efficiency in the rainy season under irrigated conditions other socioeconomic factors were not statistically significant the results imply that inefficient farms use excessive levels of inputs particularly nitrogen fertilizer this is perhaps due to the lingering effects of past input subsidization policies particularly of fertilizers in indonesia or to risk reducing behavior the results also imply that current government policies to encourage diversification of cropping practices in java may lead to greater technical inefficiencies in production in addition extension education targeted to younger farmers with low levels of formal education would improve efficiency

sensitivity of willingness to pay estimates to bid design in dichotomous choice contingent valuation models this paper addresses the sensitivity of dichotomous choice contingent valuation method dc cvm based mean willingness to pay wtp estimates to the dc cvm sample design and to alternative measures of wtp this issue is examined both analytically and empirically the analysis of ten different dc cvm data sets revealed a sensitivity in estimated mean wtp to the sample design and to the measure chosen to calculate mean wtp

multitask agency problems focus and task clustering abstract this short paper discusses recent insights of multitask agency theory it considers in turn the issues of effort substitution conflicts between tasks and implicit incentives and mission it concludes by addressing the problem of optimal task clustering

incentives for helping on the job theory and evidence recent advances in incentive theory stress the multidimensional nature of agent effort and specifically cases where workers affect one anothers performance through helping efforts this article models helping efforts as determined by the compensation package and task allocation the model is tested with australian evidence on reported helping efforts within work groups the evidence consistently supports the hypothesis that helping efforts are reduced while individual efforts are increased when promotion incentives are strong piece rates and profit sharing appear to have little effect on helping efforts while task variety and helping efforts are positively correlated

are choice experiments incentive compatible a test with quality differentiated beef steaks this study compares hypothetical and nonhypothetical responses to choice experiment questions we test for hypothetical bias in a choice experiment involving beef ribeye steaks with differing quality attributes in general hypothetical responses predicted higher probabilities of purchasing beef steaks than nonhypothetical responses thus hypothetical choices overestimate total willingness to pay for beef steaks however marginal willingness to pay for a change in steak quality is in general not statistically different across hypothetical and actual payment settings

testing choice experiment for benefit transfer with preference heterogeneity benefit transfer is a cost effective method for estimating the value of environmental goods that relies on information obtained in previous studies the multiattribute approach of choice experiments should provide advantages in terms of benefit transfer allowing differences in environmental improvements between sites as well as differences in socioeconomic and attitude characteristics between respondent populations this article investigates the capability of choice experiment method to be used in environmental benefit transfer when a random parameters approach is used to allow for preference heterogeneity we find that the inclusion of respondents taste heterogeneity reduces the magnitude of the transfer error

fairness and incentives in a multi task principal agent model this paper reports on a two task principal agent experiment in which only one task is contractible the principal can either offer a piece rate contract or a voluntary bonus to the agent bonus contracts strongly outperform piece rate contracts many principals reward high effort on both tasks with substantial bonuses agents anticipate this and provide high effort on both tasks in contrast almost all agents with a piece rate contract focus on the first task and disregard the second principals understand this and predominantly offer bonus contracts this behavior contradicts the self interest theory but is consistent with theories of fairness

theories of behavior in principal agent relationships with hidden action abstract in a laboratory experiment we investigate behavior in a principal agent situation with moral hazard we evaluate the predictive success of two theories one is the standard agency theory which assumes that the agent will accept any contract offer that satisfies his participation constraint typically requiring zero expected utility the other is the fair offer theory suggested by keser and willinger 2000 principals principles when agents actions are hidden international journal of industrial organization 18 1 163 185 which requires that the principal provide full insurance against losses to the agent and leave him a share of at most 50 of the generated surplus the treatment variable of our experiment is the cost of effort as effort costs increase expected net surplus of a contract decreases we observe that fair offer theory generally predicts observed contract offers better than standard agency theory however the predictive success of the fair offer theory decreases while the one of standard agency theory increases with decreasing expected net surplus

stated preferences real behaviour and anchoring some empirical evidence we compare different contingent valuation question formats with each other and with observed behaviour for a non monetary estimation task the expected number of kilometers travelled by automobile open ended questions open ended follow up questions dichotomous choice dc questions and double bound dc questions are included the single and double bound dc questions result in an estimated mean about twice as high as the actual value and the open ended mean the dc question overestimation seems to be due to an anchoring effect leading to yea saying behaviour our results about the difference between dc questions and open ended questions is consistent with the pattern observed in contingent valuations studies of the willingness to pay our results indicates that dc questions seem to be associated with a general overestimation problem that is present even for simple non monetary estimation tasks

estimating input mix efficiency in a parametric framework application to state level agricultural data for the united states this paper contributes to the productivity literature by demonstrating novel econometric methods to estimate input mix efficiency ime in a parametric framework input mix efficiency is defined as

utility in willingness to pay space a tool to address confounding random scale effects in destination choice to the alps we compare two approaches for estimating the distribution of consumers willingness to pay wtp in discrete choice models the usual procedure is to estimate the distribution of the utility coefficients and then derive the distribution of wtp which is the ratio of coefficients the alternative is to estimate the distribution of wtp directly we apply both approaches to data on site choice in the alps we find that the alternative approach fits the data better reduces the incidence of exceedingly large estimated wtp values and provides the analyst with greater control in specifying and testing the distribution of wtp copyright 2008 oxford university press

inducing patterns of correlation and substitution in repeated logit models of recreation demand repeated logit models are among the most commonly applied methods for modeling seasonal recreation demand in this article we examine the capabilities of the repeated nested logit and repeated mixed logit models to capture patterns of error correlation and demand substitution particular attention is paid to the use of the mixed logit framework to generalize the strong assumptions on correlation patterns across sites and choice occasions imbedded in the nested logit model we examine the implications for the range of price elasticities allowed in both models based on the implied correlation structures copyright 2002 oxford university press

the economic efficiency of farmers growing high yielding irrigated rice in india the high yielding varieties program has been operating for some fifteen years in india as a result the modern technology is no longer a new technology particularly for irrigated rice farmers the issue addressed in this paper therefore is whether farmers producing high yielding varieties hyv of rice are doing so in an economically efficient manner or do substantial opportunities remain to increase the efficiency of the farmers application of modern rice technology to get an empirical answer and to assess better the economic performance of farmers a study area was chosen to approach ideal field conditions for implementation of the program economic performance can be measured by comparing the economic efficiencies of farmer groups small and large the profit function developed by yotopoulos and lau is used as an analytical tool to examine economic efficiency including technical and price efficiency for the empirical estimation of profit and variable factor demand functions a random sample of seventy farmers growing a hyv ir20 in rabi winter season 1977 78 was selected from a progressive village in the coimbatore district tamil nadu a favorably placed area in terms of irrigation administration paddy varieties and other such factors the total population of the village seyyampalayam consisted of about 55 of farmers having operational holdings of 1 hectare or less with an average of 0 64 hectare the other 45 had operational holdings of above 1 hectare with an average of 2 79 hectares accordingly equal representation was given to both groups 35 farmers each in our random sample defining a larger farmer as one with more than 1 hectare

endogenous matching and the empirical determinants of contract form empirical work on contracts typically regresses contract choice on observed principal and agent characteristics if i some of these characteristics are unobserved or partially observed and ii there are incentives whereby particular types of agents end up contracting with particular types of principals estimated coefficients on the observed characteristics may be misleading we address this endogenous matching problem using a data set on agricultural contracts between landlords and tenants in early renaissance tuscany controlling for endogenous matching has an impact on parameters of interest and tenants risk aversion appears to have influenced contract choice

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

moral hazard and limited liability the real effects of contract bargaining abstract i examine the standard assumption in the moral hazard agency literature that the principal has all the bargaining power at the contract offer stage when the agent has limited liability as is often the case in practice the contract changes according to the distribution of bargaining power and consequently so does the agents effort implications of this result are examined

choosing between internet and mail survey modes for choice experiment surveys considering non market goods in a choice experiment setup considering a non market good this paper adds to the literature on survey mode effects by providing evidence that internet surveys can be a viable alternative to traditional mail surveys when gathering feedback from a sample of respondents the case study concerns preferences for protecting different types of landscape from road encroachment when building new motorways in denmark two samples of respondents are surveyed one by internet and one by mail the performances of the two samples are compared over six different criteria response rates protest responses demographics preferences and wtp estimation precision and finally certainty in choice differences are observed for some of these criteria implying that analysts should be aware that choosing internet over mail could be accompanied by a survey mode effect however the observed differences do not translate into significant differences in the unconditional wtp estimates in most applied economic valuation studies of non market goods the main objective is in fact estimation of wtp hence in the present case the identified survey mode effects do not severely invalidate the applicability and continued use of the internet as a suitable means of collecting data for choice experiment economic valuation of non market goods

the organization and scope of agents regulating multiproduct industries abstract a mechanism design problem with two dimensional uncertainty is solved to derive the optimal policy for regulating a monopolist with private information about the marginal cost of producing two different goods the paper establishes that informational economies of scope or incentive complementarities arise when one firm produces both goods the regulator should weigh these economies against the benefits of relative performance incentives when choosing between integrated and decentralized organizations unless the marginal costs of the two products are sufficiently positively correlated the optimal ex ante policy gives control of both markets to a single firm journal of economic literature classification number s d82 l22 l51

do protest responses to a contingent valuation question and a choice experiment differ it is suggested that the number of protest responses in stated preference surveys depends inter alia on the valuation method used choice experiments ce are said to generate a lower number of protest responses than contingent valuation cv however no comparison of both methods with respect to protest responses has been conducted to date we used both ce and cv in a survey on forest biodiversity in two german regions protest beliefs were measured for all respondents irrespective of whether they were willing to pay or not the results show no clear pattern of differences between ce and cv regarding protest beliefs and protest responses using an attitude scale based on respondents protest beliefs we see a significant negative effect of this attitude on willingness to pay in both methods however in one of the two study regions the effect is weaker in ce than in cv

measuring the relative productivity of multitasking to sole tasking in household production experimental evidence the standard household production model does not incorporate multitasking although time diary data reveal that individuals regularly multitask we incorporate multitasking into a household production model in which time spent in childcare can be sole tasked or multitasked with another household production activity and we present the results of an experiment designed to measure the productivity parameters of this model because utility and productivity are intertwined and difficult to disentangle in any household production model we vary the utility pay offs our experimental participants receive in order to determine how our estimated productivity parameters are affected by a change in the utility parameters our estimates of the relative multitasking productivities indicate that while a minute of sole tasked time produces more of a single commodity than a minute of multitasked time total household output increases when two outputs are produced simultaneously hence confirming the economic motivation f

price distortions and resource use efficiency in indian agriculture a restricted profit function approach this paper develops a generalized profit function that incorporates price distortions resulting from imperfect market conditions sociopolitical and institutional constraints as well as technical and allocative inefficiency the model is applied to test 1 the appropriateness of the neoclassical profit function and 2 the effect of education and farm size on allocative performance using farm level data from indian agriculture empirical results reject the neoclassical profit maximization hypothesis based on market prices in favor of the general model with price distortions and therefore help to improve allocation of inputs and output farm size is found to reduce price distortions only for small farmers copyright 1992 by mit press

valuing public goods a comparison of survey and hedonic approaches although the theory of public goods has progressed rapidly since paul samuelson s seminal article the empirical measurement of the value of demand for public goods only recently has received increased attention perhaps the best known and most widely accepted empirical approach has been the use of hedonic prices wherein for example it is assumed that either wages or housing values reflect spatial variation in public good characteristics of different communities this indirect approach based on theoretical work of charles tiebout kelvin lancaster sherwin rosen and others has proven quite successful among public goods or bads which have been valued using the hedonic approach are climate i hoch air pollution robert anderson and thomas crocker d harrison and d rubinfeld social infrastructure r cummings et al and other community characteristics such as noise level j nelson and ethnic composition ann schnare an alternative approach is to directly ask households or individuals to state their willingness to pay for public goods using survey techniques despite arguments that strategic bias will invalidate survey results there exists the need for an alternative to the hedonic approach as an example consider the case of a remote and unique scenic vista valuable to recreators which is threatened by air pollution from a proposed coal fired plant a typical situation in the western united states although it is possible in principle to impute the value of clean air and visibility from the relative decline in local visitation which might follow construction of a power plant information on the value of visibility at the site is needed prior to construction for socially optimal decision making on plant location and pollution control equipment the hedonic approach is unavailable both because the scarcity of local population as opposed to recreators makes use of wage or property value data impossible and because scenic vistas may themselves be unique for these reasons a randall et al first applied survey methods for valuing visibility and other environmental effects of large coal fired power plants in the four corners region of new mexico since this initial application the survey approach has been widely used to value environmental commodities where market data for hedonic analysis is difficult to acquire see for example brookshire ives and schulze rowe et al brookshire et al other early attempts to value public goods using the survey approach include r davis peter bohm and j hammack and g brown although results of using the survey approach for estimating the value of public goods appear to be internally consistent replicable and consistent with demand theory see schulze et al little work on external validation has been reported thus the purpose of this paper is to report on an experiment designed to validate the survey approach by direct comparison to a hedonic property value study the los angeles metropolitan area was chosen for the experiment because of the well defined air pollution problem and be assistant professor university of wyoming assistant professor university of missouri rolla associate professor university of wyoming and professor university of wyoming respectively the research reported here was funded under a grant methods development for assessing air pollution control benefits from the u s environmental protection agency we would like to give special thanks to alan carlin and shelby gerking for their helpful suggestions and contributions additional helpful comments were received from a myrick freeman iii john tschirhart and james murdoch all conclusions are of course our sole responsibility

how do respondents process stated choice experiments attribute consideration under varying information load the popularity of stated choice sc experiments has produced many design strategies in which researchers use increasingly more complex choice settings to study choice behaviour when the amount of information to assess increases we wonder how an individual handles such information in making a choice defining the amount of information as the number of attributes associated with each choice set we investigate how this information is processed as we vary its complexity four ordered heterogeneous logit models are developed each for an sc design based on a fixed number of attributes in which the dependent variable defines the number of attributes that are ignored we find that the degree to which individuals ignore attributes is influenced by the dimensionality of the sc experiment the deviation of attribute levels from an experienced reference alternative the use of adding up attributes where feasible the number of choice sets evaluated and the personal income of the respondent the empirical evidence supports the view that individuals appear to adopt a range of coping strategies that are consistent with how they process information in real markets and that aligning choice complexity with the amount of information to process is potentially misleading relevancy is what matters copyright 2006 john wiley sons ltd

a general model of starting point bias in double bounded dichotomous contingent valuation surveys abstract this paper develops a general model that addresses the starting point bias in the dichotomous choice evaluation data by incorporating both the anchoring effect and yea saying bias the model is applied to a contingent valuation study that evaluated the health benefits of air quality improvement in three major metropolitan areas in taiwan the empirical evidence shows a strong anchoring effect but an insignificant yea saying bias the results show a serious understated willingness to pay if the biases in anchoring and yea saying are not controlled

job design with sequential tasks and outcome externalities revisited we revisit job design with sequential tasks and outcome externalities from a different perspective extending schmitz 2013a when two sequential tasks need to be performed by wealth constrained agents the principal can hire only one agent or two different agents when there exists an outcome externality in terms of the fixed cost and such an externality is not too large if the two tasks are conflicting resp synergistic then it is optimal for the principal to hire two different agents resp only one agent when there exists an outcome externality regarding the marginal cost the opposite result holds

testing willingness to pay models of discrete choice contingent valuation survey data this paper considers models of willingness to pay wtp based on dichotomous choice contingent valuation survey data and examines the effect of the survey design on tests of goodness of fit simulations show that eliciting single binary responses result in tests that have low power in detecting departures from the maintained distribution of wtp unless the sample size is truly large the power of the tests improves if a follow up question and a moderate number of sets of bid values are used and if the bids are not placed on the extreme tails of the wtp distribution

limited liability and incentive contracting with multiple projects i examine a principal agent model with multiple projects where a risk neutral manager is protected by limited liability the analysis has several interesting implications i incentive problems are shown to be a natural source of economies of scope as combining multiple projects under the management of a single manager relaxes the limited liability constraint ii as a result managers may be overloaded with work and exert inefficiently high effort and iii the analysis has implications for the optimal allocation of projects to different managers copyright 2001 by the rand corporation

principals principles when agents actions are hidden abstract we examine the behavior of subjects in a simple principal agent game with hidden action while subjects in the role of agents tend to choose the actions which maximize their expected profits subjects in the role of principals offer contracts which differ from the theoretical predictions we identify three principles of contract design 1 the agent s remuneration for the better outcome is at least as high as the remuneration for the worse outcome 2 the agent must not risk making a loss 3 the net profit of the agent should not be higher than the net profit of the principal

choke price bias in choice experiments this paper reports on the results from a split sample choice experiment where the effect of changing the maximum level of the cost attribute is investigated the hypothesis was that changing the maximum price level would either give rise to an income effect or have no effect on consumers preferences this was tested in the framework of a valuation study of different quality characteristics of minced pork the data was analysed using a mixed logit error component model which accounts for correlation in the unobserved part of the utility results suggest that the size of the maximum price level does matter and that changing the maximum price level has a statistically significant effect on both the general preferences structure and the wtp estimates hence researchers should be very careful when defining not only the range of the price attribute but also the maximum level of the price attribute

regulating complementary products a comparative institutional analysis optimal regulation subject to informational constraints is analyzed for industries for which production requires complementary inputs an issue for regulatory policy is whether supply in these industries should be bundled or unbundled bundled supply calls for regulation of an integrated industry unbundled supply has each component regulated separately a main result is that unbundling introduces into regulation an additional component of information cost that is similar to double marginalization in the monopoly pricing of complementary products unbundling may be advantageous if it allows sufficient competition in nonmonopoly services but the information cost can exceed the benefits of competition

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

the response of peasant farmers to price incentives the use and misuse of profit functions recent famines in chad ethiopia and the sudan have highlighted a major problem facing less developed countries how does an ldc become self sufficient in food production the answers to this question range from the narrowly defined economic one or economistic approach to the more widely based institutional reforms approach the former approach typified by say schultz 1964 or the world bank 1982 would emphasise the importance of mainly price incentives the latter approach as typified by myrdal 1968 in his monumental work asian drama would emphasise the importance of land reforms as a pre condition for agricultural development the debate has sometimes followed a misleading path and discussed whether peasants are rational or whether they are lazy inert tradition bound etc the aim of this article is to show that the use of profit functions to model peasant behaviour in ldcs is seriously flawed neo classical economic theory within which profit functions are embodied ignores the historical social institutional and political context within which peasant farmers operate peasant farmers do not operate in full blooded capitalist impersonal competitive input and output markets the article is structured as follows section ii outlines the profit function approach and section iii provides a survey and critique of applications of the profit function to ldc agriculture section iv concludes with some general remarks on analysing peasant behaviour in an alternative paradigm

bias in discrete response contingent valuation abstract the empirical literature on discrete response contingent valuation has found that seemingly innocuous changes in the statistical models estimated result in significantly different point estimates of willingness to pay this paper hypothesizes and tests several potential explanations for these results first it investigates and compares the biases inherent in single bounded and double bounded maximum likelihood estimation procedures and examines how they react to various bid designs and sample sizes then it examines the presence and identification of outliers in binary choice data and how these outliers influence estimation finally it presents an alternative approach to addressing the issue of outliers which explicitly acknowledges the possibility of upwardly biased response probabilities

coherent arbitrariness stable demand curves without stable preferences economic theories of valuation generally assume that prices of commodities and assets are derived from underlying fundamental values for example in finance theory asset prices are believed to reflect the market estimate of the discounted present value of the asset s payoff stream in labor theory the supply of labor is established by the tradeoff between the desire for consumption and the displeasure of work finally and most importantly for this chapter consumer microeconomics assumes that the demand curves for consumer products chocolates cds movies vacations drugs and so forth can be ultimately traced to the valuation of pleasures that consumers anticipate receiving from these products because it is difficult as a rule to measure fundamental values directly empirical tests of economic theory typically examine whether the effects of changes in circumstances on valuations are consistent with theoretical prediction for example whether labor supply responds appropriately to a change in the wage rate whether compensated demand curves for commodities are downward sloping or whether stock prices respond in the predicted way to share repurchases however such comparative static relationships are a necessary but not sufficient condition for fundamental valuation e g summers 1986 becker 1962 was perhaps the first to make this point explicitly when he observed that consumers choosing commodity bundles randomly from their budget set would nevertheless produce downward sloping demand curves

job design with conflicting tasks reconsidered a principal wants two sequential tasks to be performed by wealth constrained agents suppose that there is an outcome externality i e a first stage success can make second stage effort more or less effective if the tasks are conflicting the principal s profit maximizing way to induce high efforts is to hire one agent to perform both tasks so that the prospect to get a larger second stage rent after a first stage success motivates the agent to work hard in the first stage in contrast when there is an effort externality i e first stage effort reduces or increases the probability of a second stage success then the principal prefers to hire two agents whenever the tasks are conflicting

determinants of farmers willingness to participate in subsidy schemes for pesticide free buffer zones a choice experiment study danish farmers have been far less interested in agri environmental subsidy schemes aes than anticipated in order to examine how to improve the appeal of such schemes a choice experiment was conducted concerning 444 danish farmers preferences for subsidy schemes for pesticide free buffer zones a random parameter logit framework was used to capture heterogeneity among farmers our results indicate that 1 the vast majority of farmers are willing to trade off the size of the subsidy for less restrictive scheme requirements and that 2 the amount of the subsidy they are willing to trade off varies with specific scheme requirements suggesting which features are most important for successful policy design our results suggest that farmers value flexible contract terms higher than reduced administrative burdens finally we suggest a practical approach to estimating a monetary value of farmers reluctance to participate in aes while the trade off s that farmers are willing to make between subsidy size and individual scheme requirements are case specific our results concerning increased use of farm advisors farmers ability of valuing different types of flexibility and our attempt to place a monetary value on farmers reluctance to engage in regulatory subsidy schemes have a potentially broader application platform

rent seeking versus productive activities in a multi task experiment incentive instruments like asset ownership and performance pay often have to strike a balance between the productive incentives and the rent seeking incentives they provide standard theory predicts that these instruments become less attractive when the effectiveness of rent seeking activities increases in contrast theories that emphasize the importance of reciprocity suggest that this relationship may go the other way around in this paper we test these predictions by means of a laboratory experiment by and large our findings confirm standard theory incentive instruments typically become less attractive when the scope for rent seeking activities increases however reciprocity motivations do seem to mitigate the adverse effects of rent seeking opportunities to a considerable extent

repeated dichotomous choice formats for elicitation of willingness to pay simultaneous estimation and anchoring effect repeated dichotomous choice contingent valuation data are generated from responses to a succession of binary questions regarding alternative prices for an environmental good in this paper we propose a simultaneous equation model that allows for endogeneity and error correlation across the responses at each stage of the bidding process the model allows us to study the evolution of anchoring effects after the second dichotomous choice question estimation involves the bayesian techniques of gibbs sampling and data augmentation and the application focuses on the preservation value of a natural area the results for a data set involving up to four successive dichotomous choice questions show that restricted multiple bounded models are rejected by the data with the general model in addition willingness to pay tends to stabilize after the second stage in the elicitation process for the general unrestricted model when taking anchoring effects into consideration it is revealed that individuals responses in the latter stages are influenced by the sequence of bid prices offered in earlier questions nevertheless they do not have a significant effect on welfare estimates

optimal incentives for teams much of the existing theory of incentives describes a static relationship that lasts for just one transaction this static assumption is not only unrealistic but the resulting predictions appear to be at odds with many work organizations the current paper introduces possible long term interaction among agents and studies how the design of explicit incentives and work organizations can exploit and interact with the implicit incentives generated by the repeated interaction of the agents the optimal incentive scheme is shown to display observed features of the increasingly popular teams such as the use of low powered group incentives