Elicitation using multiple price list formats

We examine the properties of a popular method for eliciting choices and values from experimental subjects, the multiple price list format. The main advantage of this format is that it is relatively transparent to subjects and provides simple incentives for truthful revelation. The main disadvantages are that it only elicits interval responses, and could be susceptible to framing effects. We consider extensions to address and evaluate these concerns. We conclude that although there are framing effects, they can be controlled for with a design that allows for them. We also find that the elicitation of risk attitudes is sensitive to procedures, subject pools, and the format of the multiple price list table, but that the qualitative findings that participants are generally risk averse is robust. The elicitation of discount rates appear less sensitive to details of the experimental design. Electronic Supplementary Material Supplementary material is available in the online version of this article at . JEL Classification C9, D81, D91 An erratum to this article is available at .     

Multiple switching behaviour in different display formats of multiple price lists

A common approach to elicit risk attitude is the multiple price list with a series of binary choices. However, a frequently observed problem when using multiple price lists is that participants switch more than once from the safer to the riskier option, thus exhibiting multiple switching behaviour. The present study analyses whether the visualization of different multiple price lists reduce multiple switching behaviour. Therefore, we conduct two types of multiple price lists in two different display formats. Participants are randomly assigned into a textual or a visual group and carry out both multiple price lists in the corresponding display format. Our results reveal that different types of multiple price lists lead to differences in the extent of multiple switching behaviour. Moreover, we show that the visualization of a multiple price list can be an instrument to greatly reduce multiple switching behaviour.     

Coupons and 'everyday low prices': price competition with multiple instruments

Abstract A simple two‐stage game is examined, where firms compete in prices by chosen pricing instruments. Those considered include a simple, uniform pricing technology and a promotional pricing technology like an advertised discount coupon. Consumers are separated by types, informed and uninformed. Therefore, a motive for price competition exists for the purpose of separating the two types of consumers. It is shown that the sustainability of an asymmetric choice of pricing instrument between the two firms will prevail in a duopoly market in equilibrium. Consequently, the coexistence of two different pricing schemes is viable even when firms are otherwise symmetric. JEL Classification: L1, L13
Coupons et « bas prix tous les jours >> : concurrence par les prix à l'aide de multiples instruments Ce mémoire examine un simple jeu à deux étapes dans lequel des entreprises se concurrencent par les prix à l'aide d'un instrument particulier. Les instruments considérés incluent une simple technologie de prix uniforme, et une technologie de prix de promotion sous la forme de l'annonce d'un coupon d'escompte. On divise les consommateurs en deux groupes – ceux qui sont informés et ceux qui ne le sont pas. Un des motifs pour ce genre de concurrence est de séparer les deux types de consommateurs. On montre qu'on peut soutenir un choix asymétrique d'instrument de tarification entre les deux entreprises dans un marché de duopole en équilibre. En conséquence, la coexistence de deux stratégies de prix différentes est viable quand les entreprises sont symétriques sous tous les autres rapports.     

Implicit transaction cost management using intraday price dynamics

Using the Exchange Liquidity Measure, we show that implicit transaction costs exhibit intraday regularities around specific price change signals for a sample of European blue chips publicly quoted on Euronext. Not only transaction costs follow a reverse J-shape throughout the day but they also decrease significantly around specific patterns of price dynamics. By focusing on these signals during the trading day, liquidity traders may detect intraday windows of opportunities during which implicit transaction costs are lower.     

Forecasting UK consumer price inflation using inflation forecasts

The inflation rate is a key economic indicator for which forecasters are constantly seeking to improve the accuracy of predictions, so as to enable better macroeconomic decision making. Presented in this paper is a novel approach which seeks to exploit auxiliary information contained within inflation forecasts for developing a new and improved forecast for inflation by modeling with Multivariate Singular Spectrum Analysis (MSSA). Unlike other forecast combination techniques, the key feature of the proposed approach is its use of forecasts, i.e. data into the future, within the modeling process and extracting auxiliary information for generating a new and improved forecast. We consider real data on consumer price inflation in UK, obtained via the Office for National Statistics. A variety of parametric and nonparametric models are then used to generate univariate forecasts of inflation. Thereafter, the best univariate forecast is considered as auxiliary information within the MSSA model alongside historical data for UK consumer price inflation, and a new multivariate forecast is generated. We find compelling evidence which shows the benefits of the proposed approach at generating more accurate medium to long term inflation forecasts for UK in relation to the competing models. Finally, through the discussion, we also consider Google Trends forecasts for inflation within the proposed framework.     

A computer software price index using scanner data

Abstract.  In the last 20 years, the expenditure share of prepackaged software in the national output has grown. The large number of characteristics in computer software make hedonic regression techniques impractical for purposes of controlling for quality changes. In this study, matched model price indices are constructed using monthly scanner data on prices and unit values for various prepackaged computer software titles and categories sold in Canada from January 1996 to June 2000. Quality differences are controlled for by applying the maximum overlap method. Results show that prices declined during the period studied at an average annual rate of 5.9%. JEL classification: C43, L86     

Forward-Looking Belief Elicitation Enhances Intergenerational Beneficence

Environmental and Resource Economics - One of the challenges in managing the Earth’s common pool resources, such as a livable climate or the supply of safe drinking water, is to motivate...     

Experimental Methods and Elicitation of Values

Experimental methods are currently being extensively used to elicit subjective values for commodities and projects. Three methodological problems are not systematically addressed in this emerging literature. The first is the potential for laboratory responses to be censored by field opportunities, so that lab responses can be confounded by uncontrolled knowledge of the field; the second is the potential for subjective perceptions about field opportunities, and hence valuation responses, to be affected by the institution used to elicit values; and the third is the potential for some elicitation institutions to influence subjective perceptions of characteristics of the commodity or project being valued, and hence change the very commodity being valued. All three problems result in potential loss of control over the value elicitation process. For example, we show that censoring affects conclusions drawn in a major study of beef packaging valuation. We derive implications for experimental designs that minimize the potential effect of these methodological problems.     

Elicitation Format and Sensitivity to Scope

This paper undertakes a systematiccomparison of the contingent valuation (CV) andchoice experiments (CE) methods, andinvestigates the extent to which either of themare affected by insensitivity to scope. This isachieved by undertaking separate CV estimatesof willingness to pay for two nested publicgoods, both of which are explicitly included ina parallel CE survey. The results indicate thatCE values exhibit greater sensitivity to scopethan CV values. CE gives significantly largerresults than CV for the more inclusive publicgood and significantly smaller results for theless inclusive public good.     

Managing price risks using and local polynomial kernel forecasts

This study contributes to understanding price risk management through hedging strategies in a forecasting context. A relatively new forecasting method, nonparametric local polynomial kernel (LPK), is used to forecast prices and to generate ex ante hedge ratios. The selective multiproduct hedge based on the LPK price and hedge ratio forecasts is in general found to be better than continuous hedging, no hedging and alternative forecasting procedures. Selective multivariate hedging using the LPK is found to improve hog producer's expected returns. The findings indicate that combining hedging with forecasts, especially when using the LPK procedure, can improve price risk management.     

Induced-Value Tests of Contingent Valuation Elicitation Mechanisms

Using an induced-value experimental design that varies whether values for a “good” are certain or uncertain and whether payment is real or hypothetical, this study investigates issues of demand revelation, hypothetical bias, and value uncertainty for four elicitation mechanisms used in contingent valuation surveys: dichotomous choice, dichotomous choice with follow-up certainty question, payment card, and multiple-bounded discrete choice. For all elicitation mechanisms, we find no evidence of hypothetical bias: voting decisions do not vary systematically when payment is hypothetical versus when it is real. Under all design conditions we find the fewest deviations between stated and induced values and the strongest evidence of demand revelation with dichotomous choice. Stated uncertainty in dichotomous choice follow-up and multiple-bounded discrete choice questions does correlate with uncertain induced values, but the signal is noisy. We discuss the implications of our findings for the design of contingent valuation surveys.     

Elicitation effects in a multi-stage bargaining experiment

We examine elicitation effects in a multi-stage bargaining experiment with escalating stakes conducted under direct-response and strategy-method elicitation. We find a significantly greater incidence of decisions leading to bargaining failure under direct responses. In addition, the predictive power of alternative risk attitude measures differs between the elicitation methods. Potential sources of the effects and resulting implications are discussed.     

Loan price modelling for local governments using risk premium analysis

Previous studies have highlighted the question of government loan interest as one of great current importance. Government borrowing levels are high, and reducing interest payments would generate savings to meet other spending needs and/or to lower taxation, thus supporting the sustainability of public finances. However, no previous study has presented a method for a local government to calculate its own credit risk and thus be in a position to negotiate lower interest rates on its borrowing. This article defines a financial model that enables local governments to estimate the interest rate payable on a bank loan, based on their credit risk premium, in accordance with the Basel II rules and the findings of our empirical study of large local governments.     

Detecting break in oil price series using the Box-Tiao method

This paper presents an Autoregressive Integrated Moving Average procedure which allows one to test a time series for a structural break at an unknown point in time. It is a variation of the Box-Tiao method designed to test for a structural break due to an intervention at a known time. Applying the procedure to the crude oil market, we were able to statistically show the existence of a structural break in the oil price series and to pinpoint the month during which it took place, January 1986. The results also underscore the need for testing the stability of models estimated using oil price data covering both sides of the structural break and may assist those who study the political events of the period.     

Forecasting crude oil spot price using OECD petroleum inventory levels

This paper presents a short-term monthly forecasting model of West Texas Intermediate crude oil spot price using OECD petroleum inventory levels. Theoretically, petroleum inventory levels are a measure of the balance, or imbalance, between petroleum production and demand, and thus provide a good market barometer of crude oil price change. Based on an understanding of petroleum market fundamentals and observed market behavior during the post-Gulf War period, the model was developed with the objectives of being both simple and practical, with required data readily available. As a result, the model is useful to industry and government decision-makers in forecasting price and investigating the impacts of changes on price, should inventories, production, imports, or demand change. This work is partially sponsored by the Office of Strategic Petroleum Reserve, Department of Energy, USA, and was presented at the International Atlantic Economic Conference, Athens, Greece, March 2001.     

The examination of pecan price differences using spatial correlation estimation

A spatial analysis is used to model factors that explain the price received by pecan growers. Besides the statistical aspect of the study focussing on spatial autoregressive residuals, the economic analysis of the paper identifies linkages between the price for in-shell pecans received by growers and the characteristics of the orchard, production costs and resources, and the orchard location.     

Elicitation of Subjective Probabilities when Preferences are State-Dependent

This paper presents an experimental design that enables the elicitation of subjective probabilities of decision makers' whose preferences satisfy the axioms of expected utility theory and are state-dependent.     

A Common Nomenclature for Stated Preference Elicitation Approaches

It is often difficult to determine what actually was done in work involving data collected with stated preference surveys because the terms used to describe various procedures have ambiguous and sometimes conflicting meanings. Further, terms used to describe data collection procedures often are confounded with terms used to describe statistical techniques. We call for the use of a common nomenclature to describe what was done in a data collection effort for stated preference studies, and take a first step at setting out such nomenclature. We only seek to improve clarity in the communication of research results and take no position here on appropriateness of particular procedures.