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on Discrete Choice Models |
| By: | Ewa Zawojska (Faculty of Economic Sciences, University of Warsaw); Mikołaj Czajkowski (Faculty of Economic Sciences, University of Warsaw) |
| Abstract: | The contingent valuation (CV) method uses respondents’ stated choices made in hypothetical situations to infer their preferences for environmental public goods. It enables the general public’s preferences to be stated in monetary terms and hence to estimate the economic value of a change in the quantity or quality of the goods. However, a key question remains regarding CV’s validity: do the value estimates obtained from a CV study reflect respondents’ true preferences and their maximum willingness to pay? Numerous empirical investigations have tested CV’s validity, but overall conclusions are mixed. We critically re-evaluate this evidence considering the issue of incentive compatibility in contingent valuation settings for which the necessary conditions were recently proposed by Carson and Groves (2007). Our analysis shows that once incentive compatibility conditions are considered, the available studies consistently show that the CV method is valid. As a result, we argue that contingent scenarios and elicitation formats must be made incentive compatible in order to observe consumers’ true preferences. |
| Keywords: | contingent valuation, stated preference, validity, incentive compatibility |
| JEL: | Q51 H4 D6 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2015-08&r=dcm |
| By: | Christopher Boyce (Management School,University of Stirling, Scotland, UK); Mikolaj Czajkowski (University of Warsaw, Department of Economic Sciences, Poland); Nick Hanley (Department of Geography and Sustainable Development, University of St. Andrews); (Department of Geography and Sustainable Development, University of St. Andrews); Charles Noussair (Department of Economics, Tilburg University, the Netherlands); Michael Townsend (National Institute for Water and Atmosphere Ltd, Hamilton, New Zealand); Steve Tucker (School of Management, University of Waikato, New Zealand) |
| Abstract: | This paper tests whether changes in “incidental emotions” lead to changes in economic choices. Incidental emotions are experienced at the time of an economic decision but are not part of the payoff from a particular choice. As such, the standard economic model predicts that incidental emotions should not affect behavior, yet many papers in the behavioral science and psychology literatures find evidence of such effects. In this paper, we used a standard procedure to induce different incidental emotional states in respondents, and then carried out a choice experiment on changes to an environmental good (beach quality). We estimated preferences for this environmental good and willingness to pay for changes in this good, and tested whether these were dependent on the particular emotional state induced. We also tested whether choices became more or less random when emotional states were induced, based on the notion of randomness in a standard random utility model. Contrary to our a-priori hypothesis we found no significant evidence of treatment effects, implying that economists need not worry about the effects of variations in incidental emotions on preferences and the randomness of choice, even when there is measured (induced) variation in these emotions. |
| Keywords: | choice experiments, behavioral economics, ecosystem services, emotions, rationality |
| JEL: | Q51 Q57 D03 D87 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:sss:wpaper:2015-08&r=dcm |
| By: | Christopher Boyce (Management School, University of Stirling); Mikołaj Czajkowski (Faculty of Economic Sciences, University of Warsaw); Nick Hanley (Department of Geography and Sustainable Development, University of St Andrews); Charles Noussair (Department of Economics, Tilburg University); Michael Townsend (National Institute for Water and Atmosphere Ltd); Steve Tucker (School of Management, University of Waikato) |
| Abstract: | This paper tests whether changes in “incidental emotions” lead to changes in economic choices. Incidental emotions are experienced at the time of an economic decision but are not part of the payoff from a particular choice. As such, the standard economic model predicts that incidental emotions should not affect behavior, yet many papers in the behavioral science and psychology literatures find evidence of such effects. In this paper, we used a standard procedure to induce different incidental emotional states in respondents, and then carried out a choice experiment on changes to an environmental good (beach quality). We estimated preferences for this environmental good and willingness to pay for changes in this good, and tested whether these were dependent on the particular emotional state induced. We also tested whether choices became more or less random when emotional states were induced, based on the notion of randomness in a standard random utility model. Contrary to our a-priori hypothesis we found no significant evidence of treatment effects, implying that economists need not worry about the effects of variations in incidental emotions on preferences and the randomness of choice, even when there is measured (induced) variation in these emotions. |
| Keywords: | choice experiments, behavioral economics, ecosystem services, emotions, rationality |
| JEL: | Q51 Q57 D03 D87 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2015-13&r=dcm |
| By: | Fehr, Dietmar; Hakimov, Rustamdjan; Kübler, Dorothea |
| Abstract: | We report on experiments to replicate Plott and Zeiler's (2005) findings that the WTP-WTA gap disappears when using procedures that are aimed at reducing misunderstandings, such as training rounds for the BDM mechanism. Following the design by Plott and Zeiler (2005) and Isoni, Loomes, and Sugden (2011) who re-ran the Plott/Zeiler experiments to study the paid practice rounds with lotteries, we replicate the findings from the lottery tasks where a WTP-WTA gap is present in all studies. However, unlike in the two previous studies the WTP-WTA gap does not disappear in the main task where subjects state their WTA or WTP for a mug. We introduce two additional lottery tasks to classify subjects and find that even for the most rational group of subjects who never make dominated choices in the paid practice rounds, the WTP-WTA gap in the mug task exists. The findings are replicated in a similar experiment with USB sticks instead of mugs. |
| Keywords: | endowment effect,WTP-WTA gap,BDM mechanism,misconceptions,replication |
| JEL: | C72 C92 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbmbh:spii2015204&r=dcm |
| By: | Amany Hassan Abdel-Karim (Faculty of Commerce, Tanta University) |
| Abstract: | To the best of our knowledge, no study has been undertaken concerning the role which residency plays in determining poverty level in Egypt as a developing country. Therefore, this paper explores the impact of current residency regions for Egyptian households on current subjective financial situation as an indicator of poverty level across demographic and socio-economic factors. Residency regions involve less developed and developed areas in Egypt and residency in Italy as international migration. The data set was obtained from Netherlands Interdisciplinary Demographic Institute that was collected by local research teams in Egypt and Italy. Questionnaires information was concurrently collected from domestic and migrant households in a manner that comparable survey instruments in both countries share the same basic modular design and layout. Ordered logit model is constructed to analyze these data since the response variable in this study is expressed in four categories which have natural ordering. The results indicate that migration to Italy and moving from less developed to developed regions in Egypt enhance current subjective financial situation. Improved past financial situation is an indicator for acquiring better current financial situation which is obvious in less developed regions more than developed regions and Italy. Households migrated to Italy and have current work improved their current subjective financial situation. |
| Keywords: | Egypt. Financial situation. International migration. Italy. Ordered logistic model. Residency regions |
| JEL: | A13 F22 R19 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:0801964&r=dcm |