Do status quo choices reflect preferences? Evidence from a discrete choice experiment in the context of water utilities' investment planning
AbstractDiscrete choice experiments are increasingly being used to assess preferences for services provided by regulated utilities. A commonly observed tendency of customers to opt for the status quo option may signal unwillingness to trade-off changes in service levels with bills, questioning the welfare theoretic interpretation of stated choices. In this paper, we examine status-quo choices and systematic non-trading behaviour in a discrete choice experiment encompassing a wide range of water-related service attributes. Our analysis is novel in several dimensions. First, we use a split sample design to vary the description of the status quo and the survey administration mode (online vs. in person). Second, we define service attributes to span both improvements and deterioration, so that the status quo is not necessarily the least-cost alternative. Third, we elicit information about the perception of the status quo and the impact of service attributes on day-to-day activities. Our results suggest that status quo choices largely reflect preferences.
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Bibliographic InfoPaper provided by CEPE Center for Energy Policy and Economics, ETH Zurich in its series CEPE Working paper series with number 12-87.
Length: 28 pages
Date of creation: Sep 2012
Date of revision:
cost-benefit analysis; regulated utilities; economic valuation; discrete choice experiments; individual decision making; status quo effects;
Find related papers by JEL classification:
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- H4 - Public Economics - - Publicly Provided Goods
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
- L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
- Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-20 (All new papers)
- NEP-DCM-2012-10-20 (Discrete Choice Models)
- NEP-UPT-2012-10-20 (Utility Models & Prospect Theory)
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