Asymmetric preference formation in willingness to pay estimates in discrete choice models

Individuals when faced with choices amongst a number of alternatives often adopt a variety of processing rules, ranging from simple linear to complex non-linear treatment of each attribute defining the offer of each alternative. In this paper we investigate the presence of asymmetry in preferences to test for reference effects and differential willingness to pay according to whether we are valuing gains or losses. The findings offer clear evidence of an asymmetrical response to increases and decreases in attributes when compared to the corresponding values for a reference alternative, where the degree of asymmetry varies across attributes and population segments

Subjective expected utility without preferences

This paper proposes a theory of subjective expected utility based on primitives only involving the fact that an act can be judged either "attractive" or "unattractive". We give conditions implying that there are a utility function on the set of consequences and a probability distribution on the set of states such that attractive acts have a subjective expected utility above some threshold. The numerical representation that is obtained has strong uniqueness properties.Subjective Expected Utility ; Conjoint Measurement

Reducing Sign Violation for VTTS Distributions through Recognition of an Individual’s Attribute Processing Strategy

A number of authors have recently argued that the selection of the distributional assumptions in mixed logit models, used in deriving distributions of valuation of travel time savings (VTTS) to capture taste heterogeneity, has a significant impact on the empirical evidence, including the incidence of sign change across the distribution. The stream of research by Hensher and his colleagues on accounting for the attribute processing strategy (APS) in stated choice studies, the main data source of VTTS, suggests that the existence of intuitively implausible signs for a subset of the sampled population is likely due, to some extent, to the manner in which the information in the stated choice experiment is actually input into the estimation of the choice model.. In this paper we show evidence of what happens when we take into account a specific attribute processing strategy where respondents indicate that they ignored one or more attributes in making a choice. Accounting for the APS significantly reduces the incidence of intuitively implausible VTTS, even with unconstrained distributions. Allowance for APS in real world applications will require information on the incidence of alternative attribute processing rules in constructing VTTS estimates

A combined GPS/Stated Choice experiment to estimate values of crash-risk reduction

This paper details the development and application of a Stated Choice (SC) experiment designed to explore motorists sensitivities to a kilometre-based charging regime focused around crash-risk reduction. Responses are gathered through a SC experiment that pivots off actual driving behaviour collected over a five week period using an in-vehicle Global Positioning System (GPS) device. This provision of greater reality using revealed preference (RP) information ensures that the alternatives in the SC experiment are embedded in reality, providing motorists with a more realistic context for their choices. The study demonstrates with the improved affordability, power and consumer familiarity with GPS devices, the integration of GPS recorded travel information with SC experiments is a now a feasible solution which can help enrich the quality of the reference alternatives in SC experiments in the future

Should reference alternatives in pivot design SC surveys be treated differently?

Analysts are increasingly making use of pivot style Stated Choice (SC) data in the estimation of choice models. These datasets often contain a reference alternative whose attributes remain invariant across replications for the same respondent. This paper presents some evidence to suggest that the standard specification used for such data may not be appropriate. As such, our analysis shows differences not only in the specification of the observed part of utility between the reference alternative and hypothetical SC alternatives, but also suggests differences in the error terms

General uncertainty in portfolio selection: a case-based decision approach

Often a portfolio investor can hardly imagine all states of nature relevant to his investment problem, causing general uncertainty concerning an asset allocation model. We quantify general uncertainty as the weakness of an investor’s belief in a conventional portfolio procedure, then we develop the case-based decision-making approach for determining the optimal belief degree. The economic effect of the proposed case-based methodology is investigated in the empirical study. The empirical results suggest two successful patterns of case-based decisions that could be linked to the issue of market efficiency. Moreover, our case-based modeling reflects some behavioral phenomena observed on financial markets

Asymmetrical Preference Formation in Willingness to Pay Estimates in Discrete Choice Models

Individuals when faced with choices amongst a number of alternatives often adopt a variety of processing rules, ranging from simple linear to complex non-linear treatment of each attribute defining the offer of each alternative. In recent years, there has been a growing interest in the choice process as a basis of understanding how best to represent attributes in choice outcome models. In this paper, in the context of choice amongst tolled and non-tolled routes, we investigate the presence of asymmetry in preferences, drawing on ideas from prospect theory to test for framing effects and differential willingness to pay according to whether we are valuing gains or losses. The findings offer clear evidence of an asymmetrical response to increases and decreases in attributes when compared to the corresponding values for a reference alternative. The degree of asymmetry varies across attributes and population segments, but crucially is independent of the inclusion or otherwise of an additional constant for the reference alternative, contrary to earlier findings

Cold play: Learning across bimatrix games

We study one-shot play in the set of all bimatrix games by a large population of agents. The agents never see the same game twice, but they can learn ‘across games’ by developing solution concepts that tell them how to play new games. Each agent’s individual solution concept is represented by a computer program, and natural selection is applied to derive stochastically stable solution concepts. Our aim is to develop a theory predicting how experienced agents would play in one-shot games