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on Discrete Choice Models |
| By: | Brett Day (School of Environmental Sciences, University of East Anglia.); Jose Luis Pinto Prades (Department of Economics, Universidad Pablo de Olavide) |
| Abstract: | This paper investigates whether responses to choice experiments (CEs) are subject to sequencing anomalies. While previous research has focussed on the possibility that such anomalies relate to position in the sequence of choice tasks, our research reveals that the particular sequence of tasks matters. Using a novel experimental design that allows us to test our hypotheses using robust nonparametric statistics, we observe sequencing anomalies in CE data similar to those recorded in the dichotomous choice contingent valuation literature. Those sequencing effects operate in both price and commodity dimensions and are observed to compound over a series of choice tasks. Our findings cast serious doubt on the current practice of asking each respondent to undertake several choice tasks in a CE whilst treating each response as an independent observation on that individual’s preferences. |
| Keywords: | Choice experiments; sequencing anomalies; ordering effects; dichotomous choice contingent valuation; non-parametric testing. |
| JEL: | Q51 C14 I10 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:pab:wpaper:08.10&r=dcm |
| By: | Ali al-Nowaihi; Sanjit Dhami |
| Abstract: | We develop a general theory of intertemporal choice: the reference-time theory, RT. RT is a synthesis of ideas from the hyperbolic model and subadditivity of time discounting. These models are extended to allow for a reference point for time as well as wealth. RT is able to account for all the 6 main anomalies of time discounting: gain-loss asymmetry, magnitude effect, common difference effect, delay-speedup asymmetry, apparent intransitivity of time preferences, and non-additivity of time discounting. We provide a class of utility functions compatible with RT. We show how RT can be extended to incorporate uncertainty and attribute models of intertemporal choice. |
| Keywords: | Anomalies of the discounted utility model; Hyperbolic discounting; Prospect theory; gamma-delay; alpha-subadditivity; SIE value functions |
| JEL: | C60 D91 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:08/34&r=dcm |
| By: | Emanuele Millemaci (Faculty of Economics, University of Rome "Tor Vergata"); Robert J. Waldmann (Faculty of Economics, University of Rome "Tor Vergata") |
| Abstract: | This paper focuses on two main issues. First, we find that, on average, households’ discount rates decline. This implies dynamically inconsistent preferences. Second, we calculate an indicator of the degree of dynamic inconsistency that may help us to understand how households overcome their self-control problems. We use a micro dataset containing households’ reports on the compensation for receiving hypothetical rewards with delays. We find that individuals with more severely dynamicly inconsistent preferences on average hold a statistically significantly lower share of their total wealth in checking accounts. A possible interpretation is that subjects use precommitment strategies to limit their temptation to consume immediately. |
| Keywords: | Behavioral Economics, Intertemporal choice, Hyperbolic Discounting, Dynamic Inconsistency, Precommitment |
| JEL: | D11 D12 D90 |
| Date: | 2008–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:129&r=dcm |