Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 619: Testing preference formation in learning design contingent valuation (LDCV) using advanced information and repetitivetreatments

Claudia Aravena (), W. George Hutchinson (), Fredrik Carlsson () and David I Matthews ()
Additional contact information
Claudia Aravena: Queen's University Belfast
W. George Hutchinson: Queen's University Belfast
Fredrik Carlsson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 Gothenburg, Sweden
David I Matthews: Queen's University Belfast

Abstract: Policymakers have largely replaced Single Bounded Discrete Choice (SBDC) valuation by the more statistically efficient repetitive methods; Double Bounded Discrete Choice (DBDC) and Discrete Choice Experiments (DCE). Repetitive valuation permits classification into rational preferences: (i) a-priori well-formed; (ii) consistent non-arbitrary values “discovered” through repetition and experience; (Plott, 1996; List 2003) and irrational preferences; (iii) consistent but arbitrary values as “shaped” by preceding bid level (Tufano, 2010; Ariely et al., 2003) and (iv) inconsistent and arbitrary values. Policy valuations should demonstrate behaviorally rational preferences. We outline novel methods for testing this in DBDC applied to renewable energy premiums in Chile.

Keywords: Contingent valuation; double bounded discrete choice; repetitive learning; advanced information learning; bid dependency; theories of preference formation

JEL-codes: D03; Q40; Q51

44 pages, April 2015

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