Strategic behaviour, recall problem and constructed preferences in valuation methods

  1. Farreras González, Verónica Inés
Supervised by:
  1. Pere Riera Micaló Director

Defence university: Universitat Autònoma de Barcelona

Fecha de defensa: 17 February 2009

Committee:
  1. Joan Pasqual Rocabert Chair
  2. Joan Mogas Amorós Secretary
  3. Raúl Brey Sánchez Committee member

Type: Thesis

Teseo: 179003 DIALNET

Abstract

Economists have developed various techniques to value non-market goods. Some goods, mostly public goods, are not routinely bought and sold in the market with which their value is not directly observed. Nevertheless, this value can be inferred by focusing on either stated preferences in surveys with respect to the non-market goods - stated preferences methods - or on preferences coming from the observed behaviour towards some market good with a connection to the non-market good of interest - revealed preferences methods. To value non-market goods, stated and revealed preferences methods rely on messages given by economic agents. Since the messages given by the economic agents may be biased, both stated and revealed preferences methods may lead to biased results. However, these biases have been interpreted differently in the literature. In stated preferences methods, one of the most common biases is strategic behaviour, while in revealed preferences methods discrepancies between messages given by individuals and reality have been mainly attributed to memory problems - often labelled recall problem or recall bias. But, as far as revealed preferences methods also rely on messages provided by economic agents, they may be vulnerable to strategic behaviour as well. However, there has been no attempt to attribute these discrepancies to an incentives problem, as far as we know. The analysis we undertake in Chapter 2 consists of showing from a theoretical viewpoint that revealed preferences methods may be also vulnerable to strategic behaviour. Even if a mechanism is manipulable, and economic theory may predict that agents engaged in it will behave accordingly, empirical evidence suggests that reactions to incentives and other types of verbal cues in economic surveys are heterogeneous across individuals and situations. In Chapter 3, the economic analysis is combined with a psychological approach - dual-process models - to explain the observed variance in the degree to which people respond to these incentives, and to identify in a particular application the individuals that are most likely to actually misreport when faced with the incentives to behave that way. In Chapter 4 we again explore issues that cross economics and psychology frontiers. This chapter addresses the key simplifying assumption in economics that preferences are stable and well-defined. The emerging literature on constructive preferences revises this assumption to argue that people construct their preferences on the spot when the external environment prompts them to make a decision. This constructed preference perspective spreads to the stated preferences methods, challenging the validity of these methods as instruments to measure consumer preferences. Studies based on this perspective suggest that the willingness to pay is a value constructed during the preference elicitation process. However, they do not go further in the analysis of this constructive processing hypothesis. That is, they only limit to state that possible insights of the lability of preferences are because of constructed preferences, without testing if preferences are in fact constructed. The analysis of Chapter 4 goes beyond and provides evidence to test this hypothesis. Finally, Chapter 5 deals with a growing field in experimental economics: the economic behaviour of children. The vast majority of research on children economic behaviour uses laboratory studies in which the experimenter controls the choices that subjects face. Alternatively, the economic behaviour of children might be analysed by using field data. However, as far as we know, this latter methodology has not explicitly addressed the economic behaviour of children. This study is, therefore, one of the first to explore behavioural differences in consumption of children and adults by using field data. In sum, this thesis explores, on the one hand, issues that cross economics and psychology frontiers. It combines both psychology and economics to explain questions that economic theory alone is not able to fully address. On the other hand, the thesis focuses on purely economics issues that are receiving considerable attention in the literature.