Public resource allocation, strategic behavior, and status quo bias in choice experiments
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Choice experiments, a survey methodology in which consumers face a series of choice tasks requiring them to indicate their most preferred option from a choice set containing two or more options are used to generate estimates of consumer preferences to determine the appropriate allocation of public resources to competing projects or programs. The analysis of choice-experimental data typically relies on the assumptions that choices of the non-status quo option are demand-revealing and choices of the status quo option are not demand-revealing, but, rather, reflect an underlying behavioral bias in favor of the status quo. This paper reports the results of an experiment demonstrating that both of those assumptions are likely to be invalid. We demonstrate that choice experiments for a public good are vulnerable to the same types of strategic voting that affect other types of multiple-choice voting mechanisms. We show that owing to the mathematics of choice-set design, what actually is strategic voting often is misinterpreted as a behavioral bias for the status quo option. Therefore, we caution against using current choice-experimental methodologies to inform policy making about public goods.
KeywordsChoice experiment Strategic voting Status quo bias Public goods experiment
JEL ClassificationH41 C91 C92
Compliance with ethical standards
Conflict of interest
Hutchinson: Employed as a consultant by Northern Ireland Electricity Networks Ltd in connection with the preparation of the 6th Price Control Agreement (RP6) with The Office of the Utility Regulator NI (Final Determination 30th June 2017). Study is cited herein as Queen’s University Belfast and Perceptive Insight (2015). Scarpa: Served as lead consultant in the design of the survey instruments and the choice data analysis for the study for the Australian Energy Market Operator cited herein.
Human and animal rights
This research involves human participants. The experiments reported herein were conducted under the oversight of the United States Air Force Academy Institutional Review Board, protocol number FAC20130036H.
All participants provided signed informed consent prior to participating in this research.
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