[Show abstract][Hide abstract] ABSTRACT: In most equilibrium sorting models (ESMs) of residential choice across neighborhoods, the question of whether households rent or buy their home is either ignored or else tenure status is treated as exogenous. Of course, tenure status is not exogenous and households’ tenure choices may have important public policy implications, particularly since higher levels of homeownership have been shown to correlate strongly with various indicators of improved neighborhood quality. Indeed, numerous policies including that of Mortgage Interest Deduction (MID) have been implemented with the express purpose of promoting homeownership. This paper presents an ESM with simultaneous rental and purchase markets in which tenure choice is endogenized and neighborhood quality is partly determined by neighborhood composition. The public policy relevance of the model is shown through a calibration exercise for Boston, Massachusetts, which explores the impacts of various reforms to the MID policy. The simulations confirm some of the arguments made about reforming MID but also demonstrate how the complex patterns of behavioral change induced by policy reform can lead to unanticipated effects. The results suggest that it may be possible to reform MID whilst maintaining the prevailing rates of homeownership and reducing the federal budget deficit.
Preview · Article · Dec 2014 · Journal of Public Economics
[Show abstract][Hide abstract] ABSTRACT: Landscapes generate a wide range of valuable ecosystem services, yet land-use decisions often ignore the value of these services.
Using the example of the United Kingdom, we show the significance of land-use change not only for agricultural production
but also for emissions and sequestration of greenhouse gases, open-access recreational visits, urban green space, and wild-species
diversity. We use spatially explicit models in conjunction with valuation methods to estimate comparable economic values for
these services, taking account of climate change impacts. We show that, although decisions that focus solely on agriculture
reduce overall ecosystem service values, highly significant value increases can be obtained from targeted planning by incorporating
all potential services and their values and that this approach also conserves wild-species diversity.
[Show abstract][Hide abstract] ABSTRACT: We present an experiment designed to investigate the presence and nature of ordering effects within repeat-response stated preference (SP) studies. Our experiment takes the form of a large sample, full-factorial, discrete choice SP exercise investigating preferences for tap water quality improvements. Our study simultaneously investigates a variety of different forms of position-dependent and precedent-dependent ordering effect in preferences for attributes and options and in response randomness. We also examine whether advanced disclosure of the choice tasks impacts on the probability of exhibiting ordering effects of those different types. We analyze our data both non-parametrically and parametrically and find robust evidence for ordering effects. We also find that the patterns of order effect in respondents' preferences are significantly changed but not eradicated by the advanced disclosure of choice tasks a finding that offers insights into the choice behaviors underpinning order effects.
No preview · Article · Jan 2012 · Journal of Environmental Economics and Management
[Show abstract][Hide abstract] ABSTRACT: Arguably the greatest challenge to contemporary research is to capture the inter-relatedness and complexity of the real world environment within models so at to better inform decision makers of the accurate and complete consequences of differing options. The paper presents an integrated model of the consequence of climate change upon land use and the secondary and subsequent effects arising subsequently. The model predicts the shift in land use which climate change is likely to induce and the impacts upon farm gross margins arising from this. However, both the direct driver of climate change and the induced shift in land use patterns will cause secondary effects upon the water environment for which agriculture is the major source of diffuse pollution. We model the consequent impact of changes in such pollution upon water ecology showing that these will be spatially specific and significant. These impacts are likely to cause further knock-on effects upon the recreational benefits of water environments and these are assessed using a spatially explicit revealed preference database. Taken together this analysis permits a holistic examination of a much wider range of effects and net value consequences arising from climate change impacts upon land use.
Full-text · Article · Jan 2012 · Working Paper - Centre for Social and Economic Research on the Global Environment
[Show abstract][Hide abstract] ABSTRACT: This paper investigates whether responses to choice experiments (CEs) are subject to ordering anomalies. While previous research has focussed on the possibility that such anomalies relate to position in the sequence of choice tasks, our research reveals that the particular order of tasks matters. Using a novel experimental design that allows us to test our hypotheses using simple nonparametric statistics, we observe ordering anomalies in CE data similar to those recorded in the dichotomous choice contingent valuation literature. Those ordering effects operate in both price and commodity dimensions and are observed to compound over a series of choice tasks. Our findings cast serious doubt on the current practice of asking each respondent to undertake several choice tasks in a CE while treating each response as an independent observation on that individual's preferences.
No preview · Article · May 2010 · Journal of Environmental Economics and Management
[Show abstract][Hide abstract] ABSTRACT: The literature contains evidence from some studies of asymmetric patterns of choice cycles in the direction consistent with
regret theory, and evidence from other studies of asymmetries in the opposite direction. This article reports an experiment
showing that both patterns occur within the same sample of respondents operating in the same experimental environment. We
discuss the implications for modelling behaviour in such environments.
No preview · Article · Feb 2010 · Theory and Decision
[Show abstract][Hide abstract] ABSTRACT: The contingent valuation method for estimating willingness to pay for public goods typically adopts a single referendum question format, which is relatively statistically inefficient. As an alternative, Cooper, Hanemann, and Signorello (2002) propose the one-and-one-half bound (OOHB) format, allowing researchers to question respondents about both a lower and higher limit on project costs, thereby securing substantial gains in statistical efficiency. Using an experimental design, we find that responses to OOHB valuation questions fail crucial tests of procedural invariance. We test various competing models of observed response patterns including strategic misrepresentation of standard preferences and nonstandard models of preference formation. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Full-text · Article · Nov 2009 · Review of Economics and Statistics
[Show abstract][Hide abstract] ABSTRACT: In the majority of choice experiments (CEs) the attributes of non-market goods are conveyed to respondents as a table of numeric and/or categorical data. Recent research suggests that respondents may have difficulties evaluating data in this format. In the context of a CE eliciting preferences for changes in coastal land use, this study uses a split-sample experiment to compare standard presentations with virtual reality (VR) visualisations conveying objectively identical information. We find that compared to the standard presentation, preferences elicited in VR treatments are less variable and exhibit a significant reduction in asymmetry between willingness to pay (WTP) for gains and willingness to accept (WTA) for corresponding losses. We conjecture that the greater ‘evaluability’ of the VR presentation reduces respondent judgement error and moderates reliance on the loss-aversion heuristic.
Full-text · Article · Jul 2009 · Journal of Environmental Economics and Management
[Show abstract][Hide abstract] ABSTRACT: We present an experiment designed to investigate the presence and nature of ordering effects within repeated response stated preference studies. We formulate a general structural model of such effects and use this to isolate signature patterns for position-dependent effects (learning about preferences or institutions, and the impact of fatigue) and precedent-dependent effects (starting point effects, reference pricing and various forms of strategic behavior). This is tested within a large sample, full factorial study designed to mitigate against misspecification bias and design-induced error variance problems. Non-parametric and parametric analyses are applied, the latter adopting a novel data-driven approach to the detection of ordering patterns. While we find little evidence of position dependent effects, we do find evidence of a starting point effect and various types of strategic behavior including a reference price effect where respondents tend to reject alternatives that are priced higher than recently seen alternatives.
Full-text · Article · Jan 2009 · Working Paper - Centre for Social and Economic Research on the Global Environment
[Show abstract][Hide abstract] ABSTRACT: This paper investigates whether responses to choice experiments (CEs) are subject to sequencing anomalies. While previous research has focussed on the possibility that such anomalies relate to position in the sequence of choice tasks, our research reveals that the particular sequence of tasks matters. Using a novel experimental design that allows us to test our hypotheses using robust nonparametric statistics, we observe sequencing anomalies in CE data similar to those recorded in the dichotomous choice contingent valuation literature. Those sequencing effects operate in both price and commodity dimensions and are observed to compound over a series of choice tasks. Our findings cast serious doubt on the current practice of asking each respondent to undertake several choice tasks in a CE whilst treating each response as an independent observation on that individual’s preferences.
[Show abstract][Hide abstract] ABSTRACT: We develop a two-stage, multinomial logit model of UK land use to investigate the impact of policy changes upon agriculture. The model utilises a large panel database covering the entirety of England and Wales for 14 years between 1969 and 2004 integrated with the economic and physical environment determinants of all major agricultural land use types. Our model performs well in out-ofsample prediction of current land use and we use it to assess a proposed implementation of the Water Framework Directive via a tax on fertilizer. Results indicate that such policy change would generate substantial switching from arable to grassland systems, reducing significantly the amount of nitrate leaching into UK water-bodies.
[Show abstract][Hide abstract] ABSTRACT: The choice experiment elicitation format confronts survey respondents with repeated choice tasks. Particularly within the context of valuing pure public goods, this repetition raises two issues. First, does advanced awareness of multiple tasks influence stated preferences from the outset, and second, even in the absence of such awareness, does the process of working through a series of choice tasks influence stated preferences leading to choice outcomes that are dependent on the order in which a question is answered? The possible motivators of these effects include economic-theoretic reasons such as strategic behavior, as well as behavioral explanations such as response heuristics and learning effects. A case study of a familiar good (drinking water quality) combines a split sample treatment of the presence/absence of advanced awareness with a full factorial design permitting systematic variation of the order in which choices are presented to respondents. A further sample division allows examination of effects arising from variation in the scope of the initial good presented to respondents. Using discrete choice panel data estimators we show that both advanced awareness and order effects exist alongside interactions with the scope of the initial good.
Full-text · Article · Jan 2008 · Working Paper - Centre for Social and Economic Research on the Global Environment
[Show abstract][Hide abstract] ABSTRACT: We argue that the literature concerning the valuation of non-market, spatially defined goods (such as those provided by the natural environment) is crucially deficient in two respects. First, it fails to employ a theoretically consistent structural model of utility to the separate and hence correct definition of use and non-use values. Second, applications (particularly those using stated preference methods) typically fail to capture the spatially complex distribution of resources and their substitutes within analyses, again leading to error. This paper proposes a new methodology for addressing both issues simultaneously. We combine revealed (travel cost) and stated preference (choice experiment) data within a random utility model formulated from first principles to yield a theoretically consistent distinction between the use and non-use value of improvements in a non-market natural resource. The model is specified to relate both types of value to the attributes of the good in question including the spatial arrangement of the resource under consideration and its substitutes. We test the properties of the model using data simulated from a real world case study examining an improvement of open-access waters to good ecological standards. Through a Monte Carlo experiment we show that both use and non-use parameters can be precisely estimated from a modest sample of observations.
No preview · Article · Jan 2008 · Working Paper - Centre for Social and Economic Research on the Global Environment
[Show abstract][Hide abstract] ABSTRACT: Contingent valuation (CV) surveys frequently employ elicitation procedures that return interval-censored data on respondents’ willingness to pay (WTP). Almost without exception, CV practitioners have applied Turnbull’s self-consistent algorithm to such data in order to obtain nonparametric maximum likelihood (NPML) estimates of the WTP distribution. This paper documents two failings of Turnbull’s algorithm; (1) that it may not converge to NPML estimates and (2) that it may be very slow to converge. With regards to (1) we propose starting and stopping criteria for the algorithm that guarantee convergence to the NPML estimates. With regards to (2) we present a variety of alternative estimators and demonstrate, through Monte Carlo simulations, their performance advantages over Turnbull’s algorithm. Copyright Springer Science+Business Media, Inc. 2007
[Show abstract][Hide abstract] ABSTRACT: This paper reports two experiments which examine the use of ranking methods to elicit ‘certainty equivalent’ values. It investigates
whether such methods are able to eliminate the disparities between choice and value which constitute the ‘preference reversal
phenomenon’ and which thereby pose serious problems for both theory and policy application. The results show that ranking
methods are vulnerable to distorting effects of their own, but that when such effects are controlled for, the preference reversal
phenomenon, previously so strong and striking, is very considerably attenuated.
No preview · Article · Feb 2007 · Journal of Risk and Uncertainty
[Show abstract][Hide abstract] ABSTRACT: Using a two-stage hedonic pricing methodology we estimate a system of structural demand equations for different sources of transport-related noise. In the first stage, we identify market segments using model-based clustering techniques and estimate separate hedonic price functions (HPFs) for each segment. In so doing, we show how a semiparametric spatial smoothing estimator outperforms other standard specifications of the HPF. In the second stage, we control for non-linearity of the budget constraint and identify demand relationships using techniques that account for problems of endogeneity and censoring of the dependent variable. Our estimated demand functions provide welfare estimates for peace and quiet that we believe to be the first derived from property market data in a theoretically consistent manner. Copyright Springer Science+Business Media, Inc. 2007
Full-text · Article · Feb 2007 · Environmental and Resource Economics