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Book part
Publication date: 23 October 2023

Nathaniel T. Wilcox

The author presents new estimates of the probability weighting functions found in rank-dependent theories of choice under risk. These estimates are unusual in two senses. First…

Abstract

The author presents new estimates of the probability weighting functions found in rank-dependent theories of choice under risk. These estimates are unusual in two senses. First, they are free of functional form assumptions about both utility and weighting functions, and they are entirely based on binary discrete choices and not on matching or valuation tasks, though they depend on assumptions concerning the nature of probabilistic choice under risk. Second, estimated weighting functions contradict widely held priors of an inverse-s shape with fixed point well in the interior of the (0,1) interval: Instead the author usually finds populations dominated by “optimists” who uniformly overweight best outcomes in risky options. The choice pairs used here mostly do not provoke similarity-based simplifications. In a third experiment, the author shows that the presence of choice pairs that provoke similarity-based computational shortcuts does indeed flatten estimated probability weighting functions.

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Models of Risk Preferences: Descriptive and Normative Challenges
Type: Book
ISBN: 978-1-83797-269-2

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Book part
Publication date: 30 May 2018

Arne Risa Hole

Patients and health professionals often make decisions which involve a choice between discrete alternatives. This chapter reviews the econometric methods which have been developed…

Abstract

Patients and health professionals often make decisions which involve a choice between discrete alternatives. This chapter reviews the econometric methods which have been developed for modelling discrete choices and their application in the health economics literature. We start by reviewing the multinomial and mixed logit models and then consider issues such as scale heterogeneity, estimation in willingness to pay space and attribute non-attendance.

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Health Econometrics
Type: Book
ISBN: 978-1-78714-541-2

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Book part
Publication date: 15 January 2010

Bruno Lanz, Allan Provins, Ian J. Bateman, Riccardo Scarpa, Ken Willis and Ece Ozdemiroglu

We investigate discrepancies between willingness to pay (WTP) and willingness to accept (WTA) in the context of a stated choice experiment. Using data on customer preferences for…

Abstract

We investigate discrepancies between willingness to pay (WTP) and willingness to accept (WTA) in the context of a stated choice experiment. Using data on customer preferences for water services where respondents were able to both ‘sell’ and ‘buy’ the choice experiment attributes, we find evidence of non-linearity in the underlying utility function even though the range of attribute levels is relatively small. Our results reveal the presence of significant loss aversion in all the attributes, including price. We find the WTP–WTA schedule to be asymmetric around the current provision level and that the WTP–WTA ratio varies according to the particular provision change under consideration. Such reference point findings are of direct importance for practitioners and decision-makers using choice experiments for economic appraisal such as cost–benefit analysis, where failure to account for non-linearity in welfare estimates may significantly over- or under-state individual's preferences for gains and avoiding losses respectively.

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Choice Modelling: The State-of-the-art and The State-of-practice
Type: Book
ISBN: 978-1-84950-773-8

Book part
Publication date: 31 October 2022

Christos Evangelinos, Stefan Tscharaktschiew and Marlen Mietzner

In this chapter, we support that pricing carbon emissions policies in aviation might have a lower than expected impact on aviation activity, if such policies are accompanied by…

Abstract

In this chapter, we support that pricing carbon emissions policies in aviation might have a lower than expected impact on aviation activity, if such policies are accompanied by investments in environmental technology and an adequate communication strategy by the airlines, which eliminates information asymmetries. Furthermore, we suggest that firms' environmental strategies might be an important advantage in competition. Using orthogonal design techniques, we developed a binary choice experiment, in which carbon emissions are presented to 338 German respondents among other choice-related attributes. Estimating several binary logit models, we are in a position to compute the air travelers' willingness to pay (WTP) for carbon emissions reductions. Findings suggest that passengers consider carbon emissions in their individual airline (itinerary) choice decision, if they receive the corresponding information. We also show that the passengers' WTP for carbon emissions reductions is in line with recent estimates on marginal damage cost. Furthermore, we find that WTP increases for passengers with high environmental sensitivity, whereas it decreases for frequent flyers. Investments in environmental technology and airline commitment for environmental-related firm policy positively influence the passengers' choices. It appears that the average passenger is more sensitive to environmental issues and is willing to pay more for environmental protection than industry officials or policymakers presume.

Book part
Publication date: 15 January 2010

David A. Hensher

It has long been recognised that humans draw from a large pool of processing aids to help manage the everyday challenges of life. It is not uncommon to observe individuals…

Abstract

It has long been recognised that humans draw from a large pool of processing aids to help manage the everyday challenges of life. It is not uncommon to observe individuals adopting simplifying strategies when faced with ever increasing amounts of information to process, and especially for decisions where the chosen outcome will have a very marginal impact on their well-being. The transactions costs associated with processing all new information often exceed the benefits from such a comprehensive review. The accumulating life experiences of individuals are also often brought to bear as reference points to assist in selectively evaluating information placed in front of them. These features of human processing and cognition are not new to the broad literature on judgment and decision-making, where heuristics are offered up as deliberative analytic procedures intentionally designed to simplify choice. What is surprising is the limited recognition of heuristics that individuals use to process the attributes in stated choice experiments. In this paper we present a case for a utility-based framework within which some appealing processing strategies are embedded (without the aid of supplementary self-stated intentions), as well as models conditioned on self-stated intentions represented as single items of process advice, and illustrate the implications on willingness to pay for travel time savings of embedding each heuristic in the choice process. Given the controversy surrounding the reliability of self-stated intentions, we introduce a framework in which mixtures of process advice embedded within a belief function might be used in future empirical studies to condition choice, as a way of increasingly judging the strength of the evidence.

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Choice Modelling: The State-of-the-art and The State-of-practice
Type: Book
ISBN: 978-1-84950-773-8

Book part
Publication date: 15 January 2010

Danny Campbell, Stephane Hess, Riccardo Scarpa and John M. Rose

The presence of respondents with apparently extreme sensitivities in choice data may have an important influence on model results, yet their role is rarely assessed or even…

Abstract

The presence of respondents with apparently extreme sensitivities in choice data may have an important influence on model results, yet their role is rarely assessed or even explored. Irrespective of whether such outliers are due to genuine preference expressions, their presence suggests that specifications relying on preference heterogeneity may be more appropriate. In this paper, we compare the potential of discrete and continuous mixture distributions in identifying and accommodating extreme coefficient values. To test our methodology, we use five stated preference datasets (four simulated and one real). The real data were collected to estimate the existence value of rare and endangered fish species in Ireland.

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Choice Modelling: The State-of-the-art and The State-of-practice
Type: Book
ISBN: 978-1-84950-773-8

Book part
Publication date: 27 August 2014

Derek S. Brown, Christine Poulos, F. Reed Johnson, Linda Chamiec-Case and Mark L. Messonnier

To measure adolescent girls’ preferences over features of human papillomavirus (HPV) vaccines in order to provide quantitative estimates of the perceived benefits of vaccination…

Abstract

Purpose

To measure adolescent girls’ preferences over features of human papillomavirus (HPV) vaccines in order to provide quantitative estimates of the perceived benefits of vaccination and potential vaccine uptake.

Design/methodology/approach

A discrete choice experiment (DCE) survey was developed to measure adolescent girls’ preferences over features of HPV vaccines. The survey was fielded to a U.S. sample of 307 girls aged 13–17 years who had not yet received an HPV vaccine in June 2008.

Findings

In a latent class logit model, two distinct groups were identified – one with strong preferences against vaccination which largely did not differentiate between vaccine features, and another that was receptive to vaccination and had well-defined preferences over vaccine features. Based on the mean estimates over the entire sample, we estimate that girls’ valuation of bivalent and quadrivalent HPV vaccines ranged between $400 and $460 in 2008, measured as willingness-to-pay (WTP). The additional value of genital warts protection was $145, although cervical cancer efficacy was the most preferred feature. We estimate maximum uptake of 54–65%, close to the 53% reported for one dose in 2011 surveillance data, but higher than the 35% for three doses in surveillance data.

Research limitations/implications

We conclude that adolescent girls do form clear opinions and some place significant value on HPV vaccination, making research on their preferences vital to understanding the determinants of HPV vaccine demand.

Originality/value

DCE studies may be used to design more effective vaccine-promotion programs and for reassessing public health recommendations and guidelines as new vaccines are made available.

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Preference Measurement in Health
Type: Book
ISBN: 978-1-78441-029-2

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Book part
Publication date: 31 January 2015

Soora Rasouli and Harry Timmermans

This chapter reviews models of decision-making and choice under conditions of certainty. It allows readers to position the contribution of the other chapters in this book in the…

Abstract

Purpose

This chapter reviews models of decision-making and choice under conditions of certainty. It allows readers to position the contribution of the other chapters in this book in the historical development of the topic area.

Theory

Bounded rationality is defined in terms of a strategy to simplify the decision-making process. Based on this definition, different models are reviewed. These models have assumed that individuals simplify the decision-making process by considering a subset of attributes, and/or a subset of choice alternatives and/or by disregarding small differences between attribute differences.

Findings

A body of empirical evidence has accumulated showing that under some circumstances the principle of bounded rationality better explains observed choices than the principle of utility maximization. Differences in predictive performance with utility-maximizing models are however small.

Originality and value

The chapter provides a detailed account of the different models, based on the principle of bounded rationality, that have been suggested over the years in travel behaviour analysis. The potential relevance of these models is articulated, model specifications are discussed and a selection of empirical evidence is presented. Aspects of an agenda of future research are identified.

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Bounded Rational Choice Behaviour: Applications in Transport
Type: Book
ISBN: 978-1-78441-071-1

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Book part
Publication date: 24 October 2018

Joshua P. Cohen

In this chapter, we address the question of what health economic models represent. Are they realistic? And, does model realism matter? Or, is model usefulness in terms of…

Abstract

In this chapter, we address the question of what health economic models represent. Are they realistic? And, does model realism matter? Or, is model usefulness in terms of informing pricing, reimbursement, and prescribing decisions all policymakers care about? The usefulness of models is circumscribed given that: (1) market failure is inherent in healthcare and (2) models oversimplify the preference structure underlying choices. We suggest, however, that models which employ the ceteris paribus clause can be useful in order to isolate factors that play a role in healthcare decision-making and ultimately characterize agents’ multiattribute utility functions through discrete choice experiments. As a result, policymakers gain important knowledge about decision criteria in the healthcare system.

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Including a Symposium on Mary Morgan: Curiosity, Imagination, and Surprise
Type: Book
ISBN: 978-1-78756-423-7

Keywords

Abstract

Details

Travel Survey Methods
Type: Book
ISBN: 978-0-08-044662-2

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