Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87478
Authors: 
Dekker, Thijs
Koster, Paul
Brouwer, Roy
Year of Publication: 
2013
Series/Report no.: 
Tinbergen Institute Discussion Paper 13-074/VIII
Abstract: 
This paper contrasts the discovered preference hypothesis against the theory of coherent arbitrariness in a split-sample stated choice experiment on flood risk exposure in the Netherlands. A semi-parametric local multinomial logit model (L-MNL) is developed as an alternative to the Swait and Louviere (1993) procedure to control for preference dynamics within and between samples. The L-MNL model finds empirical support for the discovered preference hypothesis in the form of a declining starting point bias induced by the first choice task. These results differ from the Swait and Louviere procedure which, due to its limited flexibility, accepts the standard assumption underlying microeconomic theory of stable preference parameters throughout the choice sequence. The observed preference dynamics puts the use of choice experiments at risk of generating biased welfare estimates if not controlled for.
Subjects: 
Preference dynamics
Discovered preference hypothesis
Coherent arbitrariness
Preference uncertainty
Local multinomial logit model
JEL: 
C14
D12
Q51
Q54
Document Type: 
Working Paper

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