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Preference Anomalies, Preference Elicitation and the Discovered Preference Hypothesis

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  • Jacinto Braga
  • Chris Starmer

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Abstract

There is wide-ranging evidence, much of it deriving from economics experiments, of ‘anomalies’ in behaviour that challenge standard preference theories. This paper explores the implications of these anomalies for preference elicitation methods. Because methods that are used to inform public policy, such as contingent valuation, are based on standard preference theories, their validity may be called into question by the anomaly data. However, on a new interpretation, these anomalies do not contradict standard theory but are errors in stated preference that can be expected to disappear as people become more experienced in relevant decision environments. We explore the evidence for this interpretation and what implications follow for preference elicitation methodology. Copyright Springer 2005

Suggested Citation

  • Jacinto Braga & Chris Starmer, 2005. "Preference Anomalies, Preference Elicitation and the Discovered Preference Hypothesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(1), pages 55-89, September.
  • Handle: RePEc:kap:enreec:v:32:y:2005:i:1:p:55-89 DOI: 10.1007/s10640-005-6028-0
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    References listed on IDEAS

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    1. Noussair, Charles & Robin, Stephane & Ruffieux, Bernard, 2004. "Revealing consumers' willingness-to-pay: A comparison of the BDM mechanism and the Vickrey auction," Journal of Economic Psychology, Elsevier, vol. 25(6), pages 725-741, December.
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    4. Shogren, Jason F., 2006. "Experimental Methods and Valuation," Handbook of Environmental Economics,in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 19, pages 969-1027 Elsevier.
    5. Gijs Kuilen & Peter Wakker, 2006. "Learning in the Allais paradox," Journal of Risk and Uncertainty, Springer, vol. 33(3), pages 155-164, December.
    6. Plott, Charles R. & Zeiler, Kathryn, 2002. "The Willingness to Pay/Willingness to Accept Gap, The "Endowment Effect" and Experimental Procedures for Eliciting Valuations," Working Papers 1132, California Institute of Technology, Division of the Humanities and Social Sciences.
    7. Bateman, Ian & Kahneman, Daniel & Munro, Alistair & Starmer, Chris & Sugden, Robert, 2005. "Testing competing models of loss aversion: an adversarial collaboration," Journal of Public Economics, Elsevier, vol. 89(8), pages 1561-1580, August.
    8. John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, Oxford University Press, pages 41-71.
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