Demand revelation in a multi-attribute discrete choice task

Demand revelation in a multi-attribute discrete choice task

The efficient provision of healthcare requires information about the costs and benefits of interventions. While many costs and benefits can be measured using market prices, many healthcare interventions are not traded in markets and consequently have no market price. In this instance, stated preference methods such as DCEs may be used to estimate the benefits. Few studies have compared hypothetical discrete choice experiment (DCE) responses with the equivalent real choices. Even when hypothetical choices and real choices are compared, it is impossible to conclude that choice differences result from the question type (hypothetical or real) and not preferences differences across the two groups. Techniques developed in experimental economics can disentangle the influence of choice context from individuals’ preferences. Using induced value experiments, this project compared hypothetical and real DCE responses, estimated the magnitude of hypothetical bias, and considered whether models of bounded rationality better explain responses to DCEs. Our results indicate that DCEs do not reliably measure individuals’ true valuation of the good. We find little evidence that individuals make different choices in hypothetical and incentivised settings. We find that choice complexity affects individuals’ ability to make correct choices and that individuals learn as they complete the task.

Outcome and Translation

Our results imply that researchers must take choice complexity and learning into account when designing stated preference studies.

HERU researchers involved in this research project: Verity Watson

External collaborators: S Luchini (GREQAM, Marseille)

Publications

Luchini, S. and Watson, V. (2014) 'Are choice experiments reliable? Evidence from the lab', Economics Letters, 124(1), 9-13.

Presentations

Watson, V. (2010) 'Demand revelation and hypothetical bias in discrete choice experiments', European Conference on Health Economics, Helsinki, July 2010.

Watson, V. (2011) 'Hypothetical bias and demand revelation in discrete choice experiments', University of Oxford, Oxford, March 2011.

Watson, V. (2011) 'Hypothetical bias and demand revelation in discrete choice experiments', Imperial College Business School, London, February 2011.

Watson, V. (2012) 'Using induced value experiments to investigate demand revelation in stated preference methods', College des Economistes de la Santa (CES)/ Health Economists' Study Group (HESG). Aix-en-Provence, January 2012.