IngentaConnect Designing Choice Sets for Stated Preference Methods: The Effects ...

Authors: DeShazo J.R.¹; Fermo G.²

Source: Journal of Environmental Economics and Management, Volume 44, Number 1, July 2002 , pp. 123-143(21)

Abstract:

We vary the complexity of choice sets used in stated preference methods to evaluate the impact on choice consistency. We define five measures of complexity that capture either the amount of information or the correlational structure of information in a choice set. Using these measures as randomly assigned treatments in a large experiment, we analyze the consistency of respondents' choices using a heteroskedastic multinomial logit model. We find that: (i) all of our measures of choice set complexity affect choice consistency, (ii) changes in the correlational structure of information have the largest impact on choice consistency, and (iii) choice complexity significantly distorts welfare estimates. Our results confirm economists' initial worry that moving from contingent valuation to conjoint methods will increase complexity-induced choice inconsistency. However, our analysis also shows that these negative impacts may be mitigated if precautions are taken at the design and estimation stages of stated preference methods. © 2002 Elsevier Science (USA).

Keywords: consumer choice; complexity; choice consistency and heteroskedastic logit

Language: English

Document Type: Research article

Affiliations: 1: School of Public Policy and Social Research, University of California at Los Angeles, Los Angeles, California, 90095-1656 2: Ernst & Young, New York, New York

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Designing Choice Sets for Stated Preference Methods: The Effects of Complexity on Choice Consistency