nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2010‒06‒26
six papers chosen by
Philip Yu
Hong Kong University

  1. Testing construct validity of verbal versus numerical measures of preference uncertainty in contingent valuation By Sonia Akter; Jeff Bennett
  2. Inducing Strategic Bias: and its implications for Choice Modelling design By Michael Burton
  3. Valuing protection of the Great Barrier Reef with choice modelling by management policy options By John Rolfe; Jill Windle
  4. Restricted versus unrestricted choice in labelled choice experiments: exploring the tradeoffs of expanding choice dimensions By Jill Windle; John Rolfe
  5. The Greying Church: The Impact of Life Expectancy on Religiosity By Paola Manzini; Marco Mariotti
  6. Moody choice By Arnab Bhattacharjee; Jie Hany

  1. By: Sonia Akter (Crawford School of Economics and Government, the Australian National University); Jeff Bennett (Crawford School of Economics and Government, the Australian National University)
    Abstract: The numerical certainty scale (NCS) and polychotomous choice (PC) methods are two widely used techniques for measuring preference uncertainty in contingent valuation (CV) studies. The NCS follows a numerical scale and the PC is based on a verbal scale. This paper presents results of two experiments that use these preference uncertainty measurement techniques. The first experiment was designed to compare and contrast the uncertainty scores obtained from the NCS and the PC method. The second experiment was conducted to test a preference uncertainty measurement scale which combines verbal expressions with numerical and graphical interpretations: a composite certainty scale (CCS). The construct validity of the certainty scores obtained from these three techniques was tested by estimating three separate ordered probit regression models. The results of the study can be summarized in three key findings. First, the PC method generates a higher proportion of ‘Yes’ responses than the conventional dichotomous choice elicitation format. Second, the CCS method generates a significantly higher proportion of certain responses than the NCS and the PC methods. Finally, the NCS method performs poorly in terms of construct validity. We conclude that, overall, the verbal measures perform better than the numerical measure. Furthermore, the CCS method is promising in measuring preference uncertainty in CV studies. However, further empirical applications are required to develop a better understanding of its strengths and the weaknesses.
    Keywords: Preference uncertainty, contingent valuation, numerical certainty scale, polychotomous choice method, composite certainty scale, climate change, Australia
    JEL: Q51 Q54
    Date: 2010–01
  2. By: Michael Burton (School of Agricultural and Resource Economics, University of Western Australia.)
    Abstract: It has been suggested that the nature of the task within a multi-attribute multi-alternative choice experiment may be sufficiently complex to make it difficult for individuals to develop response strategies to strategically bias their answers. This experiment tested that hypothesis by setting experimental conditions that provide incentives for strategic bias. By changing design parameters one can investigate whether the strategic bias can be reduced. The answer is effectively no: under most circumstances, respondents could find a strategy that achieved significant bias in inferred preferences. The circumstances where this did not occur (involving ranking alternatives, rather than selecting a single preferred alternative) the inferred preferences reflected neither the intended bias, nor their original preferences, making the answers useless to both respondent and researcher.
    Keywords: Strategic bias, choice modeling, complexity
    JEL: Q51 C91
    Date: 2010–05
  3. By: John Rolfe (Faculty of Business and Informatics at Central Queensland University y); Jill Windle (Faculty of Business and Informatics at Central Queensland University)
    Abstract: In this paper the results of a choice modelling experiment to value increased protection of the Great Barrier Reef in Australia is reported. There are very few previous studies that identify protection values for the Great Barrier Reef, making it difficult to evaluate whether the community benefits from future additional protection measures are larger than the costs involved. The valuation experiment that has been conducted is novel in two important ways. First, different management policies to increase protection have been included as labels in the choice experiment to test if the mechanisms to achieve improvements are important to respondents. Second, the level of certainty associated with predicted reef health has been included as an attribute in the choice profiles, helping to distinguish between outcomes of different management policies. The results show that protection values vary with the policy scope of the improvements being considered. Values are sensitive to whether protection will be generated by improving water quality entering the reef, increasing conservation zones or reducing greenhouse gas emissions, and the level of certainty of outcomes. The average household willingness to pay for five years for each additional 1% of protection is approximately $26.37 when the broad management options to generate improvements were included in the choice sets. These results can be extrapolated to a total value held by Queensland households of $132.8M to $171.5M per 1% improvement, depending on the assumptions used about the discount rate.
    Date: 2010–01
  4. By: Jill Windle (Faculty of Business and Informatics at Central Queensland University); John Rolfe (Faculty of Business and Informatics at Central Queensland University Author-Homepage
    Abstract: The main objective of the study outlined in this paper was to examine how the inclusion of an additional labelled alternative, to provide respondents with more choice in a stated preference survey, impacted on choice complexity. The valuation context was to elicit preferences for improvements in the future condition of the Great Barrier Reef, Australia. A split sample experiment was implemented where one survey included four labeled alternatives: a status quo option and three specific policy management options (restricted choice). The other survey provided respondents with an unrestricted choice set by including a fifth alternative choice, labelled as “a combination of management options”. While the additional option improved opportunities to find an attractive choice profile, adding an extra alternative increased the complexity of the survey. The tradeoff between choice flexibility and complexity is examined in terms of changes in respondents’ choice behaviour and the performance of the different models. The results provide some evidence that adding a combination policy alternative did change the ways that respondents viewed tradeoffs, but that choice behaviour and subsequent value estimates were consistent across the two survey formats.
    Keywords: Choice complexity, choice modelling experiments; labelled alternatives; policy management options; multiple alternatives
    Date: 2010–03
  5. By: Paola Manzini; Marco Mariotti
    Abstract: We study a psychologically based foundation for choice errors. The decision maker applies a preference ranking after forming a ?consideration set?prior to choosing an alternative. Membership of the consideration set is determined both by the alternative speci?c salience and by the rationality of the agent (his general propensity to consider all alternatives). The model turns out to include a logit formulation as a special case. In general, it has a rich set of implications both for exogenous parameters and for a situation in which alternatives can a¤ect their own salience (salience games). Such implications are relevant to assess the link between ?revealed? preferences and ?true?preferences: for example, less rational agents may paradoxically express their preference through choice more truthfully than more rational agents.
    Keywords: religiosity, life expectancy, church attendance
    JEL: D01
    Date: 2010–06
  6. By: Arnab Bhattacharjee; Jie Hany
    Abstract: If choices depend on the decision maker's mood, is the attempt to derive any consistency in choice doomed? In this paper we argue that, even with full unpredictability of mood, the way choices from a menu relate to choices from another menu exhibits some structure. We present two alternative models of moody choice. and show that, in either of them, not all choice patterns are possible. Indeed, we characterise both models in terms of consistency requirements of the observed choice data.
    Keywords: Bounded rationality, procedural rationality, utility maximization, choice behavior.
    JEL: D01
    Date: 2010–05

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