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Empirical evidence of inconsistency in Standard Gamble choices under direct and indirect elicitation methods

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  • Susan Chilton
  • Anne Spencer

Abstract

Expected Utility Theory (EUT) underlies the Standard Gamble (SG) method for eliciting people's preferences towards safety policy and risky treatments. Increasingly surveys using this method decompose the SG questions into two or more intermediate questions. Under the EUT assumption of procedural invariance these indirect responses are theoretically equivalent to those elicited directly through one question. We investigate the issue empirically in two studies, both of which find that procedure invariance is violated. Despite this, and the differences in the direction of the discrepancies that we observe in these studies, we show how these results are in fact consistent with an alternative theory to EUT - Prospect Theory - and discuss the implications for future policy and research.

Suggested Citation

  • Susan Chilton & Anne Spencer, 2001. "Empirical evidence of inconsistency in Standard Gamble choices under direct and indirect elicitation methods," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 137(I), pages 65-86, March.
    • Handle: RePEc:ses:arsjes:2001-i-7
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    Cited by:

    1. Chen Li & Zhihua Li & Peter Wakker, 2014. "If nudge cannot be applied: a litmus test of the readers’ stance on paternalism," Theory and Decision, Springer, vol. 76(3), pages 297-315, March.
    2. Anne Spencer, 2004. "The implications of linking questions within the SG and TTO methods," Health Economics, John Wiley & Sons, Ltd., vol. 13(8), pages 807-818, August.
    3. Mandy Ryan & Mabelle Amaya‐Amaya, 2005. "‘Threats’ to and hopes for estimating benefits," Health Economics, John Wiley & Sons, Ltd., vol. 14(6), pages 609-619, June.
    4. Anne Spencer, 2001. "The Time Trade-Off Method: An Exploratory Study," Working Papers 437, Queen Mary University of London, School of Economics and Finance.
    5. Chilton, Susan M. & Burgess, Diane & Hutchinson, W. George, 2006. "The relative value of farm animal welfare," Ecological Economics, Elsevier, vol. 59(3), pages 353-363, September.
    6. Anne Spencer, 2001. "The Implications of Linking Questions within the SG and TTO Methods," Working Papers 438, Queen Mary University of London, School of Economics and Finance.
    7. Anne Spencer, 2001. "The Implications of Linking Questions within the SG and TTO Methods," Working Papers 438, Queen Mary University of London, School of Economics and Finance.
    8. Adam Oliver, 2005. "Testing the internal consistency of the lottery equivalents method using health outcomes," Health Economics, John Wiley & Sons, Ltd., vol. 14(2), pages 149-159, February.
    9. Anne Spencer, 2001. "The Time Trade-Off Method: An Exploratory Study," Working Papers 437, Queen Mary University of London, School of Economics and Finance.

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