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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Boxall, Peter & Adamowicz, W.L. & Moon, Amanda, 2009. "Complexity in choice experiments: choice of the status quo alternative and implications for welfare measurement," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(4), December.
- John A. List, 2001.
"Do Explicit Warnings Eliminate the Hypothetical Bias in Elicitation Procedures? Evidence from Field Auctions for Sportscards,"
American Economic Review,
American Economic Association, vol. 91(5), pages 1498-1507, December.
- John List, 2001. "Do explicit warnings eliminate the hypothetical bias in elicitation procedures? Evidence from field auctions for sportscards," Framed Field Experiments 00163, The Field Experiments Website.
- Train, K. & Weeks, M., 2004. "Discrete Choice Models in Preference Space and Willingness-to Pay Space," Cambridge Working Papers in Economics 0443, Faculty of Economics, University of Cambridge.
- Schkade David A. & Payne John W., 1994. "How People Respond to Contingent Valuation Questions: A Verbal Protocol Analysis of Willingness to Pay for an Environmental Regulation," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 88-109, January.
- Bateman, Ian J. & Day, Brett H. & Jones, Andrew P. & Jude, Simon, 2009. "Reducing gain-loss asymmetry: A virtual reality choice experiment valuing land use change," Journal of Environmental Economics and Management, Elsevier, vol. 58(1), pages 106-118, July.
- Day, Brett & Pinto Prades, Jose-Luis, 2010. "Ordering anomalies in choice experiments," Journal of Environmental Economics and Management, Elsevier, vol. 59(3), pages 271-285, May.
- Jürgen Meyerhoff & Ulf Liebe, 2009. "Status Quo Effect in Choice Experiments: Empirical Evidence on Attitudes and Choice Task Complexity," Land Economics, University of Wisconsin Press, vol. 85(3), pages 515-528.
- Nielsen, Jytte Seested, 2011. "Use of the Internet for willingness-to-pay surveys: A comparison of face-to-face and web-based interviews," Resource and Energy Economics, Elsevier, vol. 33(1), pages 119-129, January.
- Craig Landry & John List, 2007.
"Using ex ante approaches to obtain credible signals for value in contingent markets: Evidence from the field,"
Framed Field Experiments
00168, The Field Experiments Website.
- Craig E. Landry & John A. List, 2007. "Using Ex Ante Approaches to Obtain Credible Signals for Value in Contingent Markets: Evidence from the Field," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 420-429.
- Lindhjem, Henrik & Navrud, Ståle, 2011. "Are Internet surveys an alternative to face-to-face interviews in contingent valuation?," Ecological Economics, Elsevier, vol. 70(9), pages 1628-1637, July.
- Wiktor Adamowicz & Peter Boxall & Michael Williams & Jordan Louviere, 1998. "Stated Preference Approaches for Measuring Passive Use Values: Choice Experiments and Contingent Valuation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 64-75.
- Adamowicz W. & Louviere J. & Williams M., 1994. "Combining Revealed and Stated Preference Methods for Valuing Environmental Amenities," Journal of Environmental Economics and Management, Elsevier, vol. 26(3), pages 271-292, May.
- Stephane Hess & John Rose, 2009. "Should Reference Alternatives in Pivot Design SC Surveys be Treated Differently?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 42(3), pages 297-317, March.
- Peter Boxall & W. L. (Vic) Adamowicz & Amanda Moon, 2009. "Complexity in choice experiments: choice of the status quo alternative and implications for welfare measurement ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(4), pages 503-519, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carlos Ordas).
If references are entirely missing, you can add them using this form.