Simplifying Complex Decisions: Evidence from A Discrete Choice Experiment (Job Market Paper)
Cognitive psychologists and behavioral decision theorists have argued that individuals often simplify their decision-making processes when solving complex decision tasks. Discrete choice experiment (DCE), as a popular nonmarket valuation approach, faces challenges of incorporating simplifying strategies in ensuring incentive compatibility and consistent estimation of welfare values. This paper investigates how respondents in DCE use simplifying strategies to make decisions, how such simplification evolves in repeated choice tasks, and how failing to identify these strategies can lead to biased welfare estimates through developing a crossing choice sets non-linear logistic regression model.
Regret Minimization in Decision Making: Implications for Choice Modeling and Policy Design
A major assumption underlying the discrete choice experiment (DCE) approach for welfare valuation is that a respondent’s utility from a particular alternative is independent of the other alternatives in the choice set. However, this assumption has been challenged by recent developments in behavioral economics. This paper develops a Random Regret Minimization (RRM) model (as opposed to the conventional Random Utility Maximization model) to empirically test the independence assumption and studies the implications for choice modeling and policy design when the assumption is violated. This RRM posits that respondents make choices in order to minimize anticipated regret generated by comparing each of the attributes of the chosen alternative against that of the foregone alternatives.
Farmer Decisions on Nitrogen Application: the Role of Information and Learning
This paper empirically investigates farmers’ decisions on Conservation Agriculture (CA) adoption to facilitate CA policy design. Different from most relevant works examining the heterogeneity underlying individuals preferences, this paper focuses on two external factors: information and learning opportunity. A two by two treatment survey experiment is conducted to investigate how these two factors work together to affect farmers’ willingness to accept. Moreover, this paper evaluates the effects of accounting for individual perceived Status Quo (SQ) in discrete choice analysis. The study suggests that failing to incorporate individual specific status quo with SQ alternative may give inconsistent estimation.