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Preference Inconsistencies of a Rational Decision Maker

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  • Kassas, Bachir
  • Palma, Marco
  • Zhang, Yvette

Abstract

The longstanding dispute over the accuracy of stated preference methods in eliciting the true valuations of individuals has stimulated interest in analyzing preference inconsistencies between revealed and stated preference mechanisms. This paper uses preference orderings to provide a more robust comparison between revealed and stated preferences and assess the validity of the latter. This is done by comparing an incentive compatible auction experiment (recoded as implied ranks) with a ranking procedure. Partial ranking models are constructed to examine consumer preferences under the two valuation mechanisms for the most preferred and the least preferred alternatives in order to provide a more detailed analysis. The stability and symmetry of parameters was tested and systematic differences between the models were analyzed in order to measure the extent of preference inconsistencies between the auction exercise and ranking procedure. Furthermore, the predictive power of the models was calculated to evaluate the relative reliability of each mechanism. The results provide robust evidence that individuals often employ different behavioral rules under the two elicitation mechanisms, especially when expressing mild feelings about certain alternatives. Compared to the more accurate auctions mechanism, the ranking exercise seems to perform fairly well only when eliciting preferences over the best ranked alternative.

Suggested Citation

  • Kassas, Bachir & Palma, Marco & Zhang, Yvette, 2015. "Preference Inconsistencies of a Rational Decision Maker," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 229737, Southern Agricultural Economics Association.
  • Handle: RePEc:ags:saea16:229737
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    File URL: http://purl.umn.edu/229737
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    References listed on IDEAS

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    1. Harzing, Anne-Wil & Baldueza, Joyce & Barner-Rasmussen, Wilhelm & Barzantny, Cordula & Canabal, Anne & Davila, Anabella & Espejo, Alvaro & Ferreira, Rita & Giroud, Axele & Koester, Kathrin & Liang, Yu, 2009. "Rating versus ranking: What is the best way to reduce response and language bias in cross-national research?," International Business Review, Elsevier, vol. 18(4), pages 417-432, August.
    2. Bunch, David S. & Bradley, Mark & Golob, Thomas F. & Kitamura, Ryuichi & Occhiuzzo, Gareth P., 1993. "Demand for clean-fuel vehicles in California: A discrete-choice stated preference pilot project," Transportation Research Part A: Policy and Practice, Elsevier, vol. 27(3), pages 237-253, May.
    3. Jay R. Corrigan & Dinah Pura T. Depositario & Rodolfo M. Nayga & Ximing Wu & Tiffany P. Laude, 2006. "Comparing Open-Ended Choice Experiments and Experimental Auctions: An Application to Golden Rice," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 837-853.
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    More about this item

    Keywords

    auctions; choice-ranking; ordinal data; parameter stability; parameter symmetry; preference inconsistency; revealed preferences; stated preference; Consumer/Household Economics; Institutional and Behavioral Economics; D12;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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