stated preference 2010. stated means you ask somebody about something rather than watch them do...
TRANSCRIPT
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Stated Preference
2010
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Stated
• Means you ask somebody about something rather than watch them do something.
• You can lie.
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Passive use
• I love wolves existence but I don’t do anything at all with them– I don’t contribute to wolf organizations– I don’t go to Yellowstone to see them– I just love them while sitting alone in my
armchair• Travel cost gives a value for me of zero for
wolves.
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Option
• One day I might want to go see wolves in Yellowstone.
• I am willing to pay for the option to see them.
• An option is the right and not the obligation.– A theatre ticket is the right to see the play, but
the author will not come with a gun to force you to see it.
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Money
• First talk to them about money and how it could be used for other projects.
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Background
• Give the subjects some context for the project that will be proposed.
• Then tell respondent about wolves and their role in ecosystem.– Show them pictures of wolves, yellowstone,
and excess herbivory
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So tell about a project
• Describe a specific project– Allow them to run free in Yellowstone– Need money to pay for dead sheep
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And a specific payment method
• A surcharge on sales tax for meat• An income tax surcharge• A surcharge on sales tax for environment
texts
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Reasons to Vote for and Against
• Remind the subject that there are good reasons to vote for or against the project.
• Trying not to convey the attitude that all good people are for a meat tax.
• (A good reason to have disinterested people, not the investigator, ask the questions.)
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The Question
• Open ended:– How much would you be willing to pay to
make yellowstone a wolf haven?• Referendum:
– Would vote for a surcharge on your income tax of $X to support the wolf indemnification program so that Yellowstone can be a wolf haven?• Choose x to be different numbers for different
people to trace a demand curve.
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The debrief
• Ask about– Income– Education– Family status– Etc
• Use to show how characteristics affect choice.– Would wonder about survey if wolves were an
inferior good and men loved them more than women
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Lies
• You want more wolves in Yellowstone and are truly willing to pay $50.
• You know that the WTP measure computed from the survey will determine the number of wolves.
• What number do you give as an answer to how much will you pay?
• Do you say yes to the referendum at $60?
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How to analyze discrete choice
• Yes or No votes to save the wolves• Take bart, bus or drive• etc.
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Cumulative and Density: What percent above?
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Random Utility model
• U = a E + b I– E # of wolves– I Income a and b are parameters
• Two cases, with and without improvement• U1 = aE1 + b I
• U2 = aE2 + b (I-P) – P is payment
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Pick the best
• Says yes to referendum if– U2 > U1
– a(E2-E1) –bP > 0
• If people are a little different – ei is the little bit of difference in wolf liking– U2 = aE2 + b(I-P) +ei
– U2 > U1 means• a(E2-E1) –bP + ei > 0
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Who says yes
– a(E2-E1) –bP + ei > 0
– All those who have e’s• ei > -a (E2 – E1) + bP
• So for each P we will have some fraction that says Yes and some that says NO.
• We choose a and b to make the predicted fractions as close as possible to the actual fractions.
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Wolf value
• Now we have the parameters a and b.• U = a E + b I
– So 1 wolf increase U by a– $1 increase U by b– U constant is 1 wolf up and $a/b down– Value of a wolf is a/b!
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Conjoint Analysis
• Two or more variants on the project.– Garden with 30% native plants– Garden with 100% native plants– Garden with no native plants.
• Attributes– Intensity of color display– Water use– Cost
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Alternatives have different attributes
• No native– Intense color, low cost, high water
• 20%– intense color, high cost, medium water
• All native– Dull, low cost, low water
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Utility depends on attribs
• Ui= a * colori + b * costi + c * wateri
– Where i = all native, non-native, 20% native– Utility of the alternative depends upon the
quantity of the attributes and their valuation, a, b,c.
• We ask people to choose an alternative and use RUM to find the a, b, c that get us predictions close to the fraction that actually chose the alternatives
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Advantage
• Learn the value of the underlying attributes.– Does the saved water drive peoples use of
native landscape?– Are people color freaks?– Is it all about the pocketbook?
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Criticism of SP in general
• Background.– The Exxon Valdez spawned a huge litigation
battle. Exxon realized that contingent valuation had the potential to make every spill a company threatening situation. Arm chair environmentalists would have to be paid.
– Economics profession was heavily involved in either defending or attacking.
– Michael Hanneman and Richard Carson were on the side of making the companies pay.
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Hypothetical bias
• You don’t really have to pay with a CV study.– There are studies where both CV and
revealed preference have been done and CV doesn’t generally overstate the revealed preference answer.
– e.g. Do a cv study on the value of hunting licenses. Then send the licenses out with a check and say return one.
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Scope
• If you would pay $20 to save one lake, would you pay $20,000 to save 1,000 lakes?
• $26 to clean up local water and $68 to clean up all water?
• Are these internally inconsistent?• Probably not. Willing to pay less for each
additional lake, WTP more for local than far away.
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Experimental
• Pay people to taste SOA. It is bitter.• Give people $10. If a majority says yes,
every one of them gives up $5 and gets a piece of sports memorabilia. Compare to a CV experiment, hypothetical.
• External Validity —do these experiments tell us anything about the world at large or only students and sports memorabilia fans?
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A Pitch for Marketing
• I have a new pizza. Should I be marketing it which costs $25 million or should I forget it?
• Marketing uses techniques like those above—surveys and experiments to learn about demand.
• Unlike our environment business, they learn what true demand is when they put the pizza on the market.