When preferences go bad

1. When preferences go bad John Rolfe

2. When preferences go bad Treat most parameters in CM as linear and continuous Very limited information available to distinguish how accurate this is Preferences could be: Non-linear Discontinuous Lexicographic

3. The philosophical debate Economists tend to assume that people can tradeoff between different items But allow that at some tradeoffs, or tradeoffs at some levels, may not be realistic WTA $20,000 to sell your children into slavery WTP $20,000 to send children to private schools Some social scientists tend to assume preferences should not compared

4. Non-linear When attribute changes are relatively small (and payment changes are small), a linear-in-parameters assumption is okay Expect non-linear effects when preference range is large enough to create significant differences in marginal utility Can handle in CM by converting data to another form

5. Discontinuous preferences Preferences may not follow some continuous pattern Classic case is WTP versus WTA One sharp break in preferences Preference behaviour more likely to be in ‘blocks’ when dealing with categorical attributes

6. Coefficient values for estuary levels Status quo level

7. How to interpret preferences for Estuary health? Declining values for lower levels of health Almost flat values for increases in estuary health Simply two slopes for WTP and WTA sections ? Or are preferences for protection concentrated on loss scenarios?

8. Values for unallocated water levels Status quo level

9. Discontinuous preferences Results from modelling reserve water levels suggest two groups of values – depending on whether change is negative or positive Suggest that preferences may be discontinuous depending on whether losses or gains are involved

10. When respondents won’t make tradeoffs • Two key categories • Response pattern is general • essentially this is a design problem, • we would normally set out the CM experiment in ways so that the tradeoffs don't occur. • Response patterns only in sub-groups • essentially an analysis problem. • Do the techniques we have for addressing heterogeneity in choice behaviour cope with lexicographic sub-groups?