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Preference Anomalies, Preference Elicitation and the Discovered Preference Hypothesis

  • Jacinto Braga
  • Chris Starmer

    ()

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

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File URL: http://hdl.handle.net/10.1007/s10640-005-6028-0
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Article provided by Springer & European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 32 (2005)
Issue (Month): 1 (09)
Pages: 55-89

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Handle: RePEc:kap:enreec:v:32:y:2005:i:1:p:55-89
DOI: 10.1007/s10640-005-6028-0
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  1. John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 41-71.
  2. 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.
  3. Chen, Yan, 2008. "Incentive-compatible Mechanisms for Pure Public Goods: A Survey of Experimental Research," Handbook of Experimental Economics Results, Elsevier.
  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. McCabe, Kevin A & Rassenti, Stephen J & Smith, Vernon L, 1990. "Auction Institutional Design: Theory and Behavior of Simultaneous Multiple-Unit Generalizations of the Dutch and English Auctions," American Economic Review, American Economic Association, vol. 80(5), pages 1276-83, 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. Gijs Kuilen & Peter Wakker, 2006. "Learning in the Allais paradox," Journal of Risk and Uncertainty, Springer, vol. 33(3), pages 155-164, December.
  8. 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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