Do People Always Pay Less Than They Say? Testbed Laboratory Experiments with IV and HG Values

Hypothetical bias is a long‐standing issue in stated preference and contingent valuation studies—people tend to overstate their preferences when they do not experience the real monetary consequences of their decision. This view, however, has been challenged by recent evidence based on the elicitation of induced values (IV) in the lab and homegrown (HG) demand function from different countries. This paper uses an experimental design to assess the extent and relevance of hypothetical bias in demand elicitation exercises for both induced (IV) and homegrown (HG) values. For testbed purpose, we use a classic second‐price auction to elicit preferences. Comparing the demand curve we elicit in both, hypothetical bias unambiguously (i) vanishes in an IV, private good context and (ii) persists in HG values elicitation context. This suggests hypothetical bias in preference elicitation appears to be driven by “preference formation” rather than “preference elicitation.” In addition, companion treatments highlight two sources of the discrepancy observed in the HG setting: the hypothetical context leads bidders to underestimate the constraints imposed by their budget limitations, whereas the real context creates pressure leading them to bid “zero” to opt out from the elicitation mechanism. As a result, there is a need for a demand elicitation procedure that helps subjects take the valuation exercise sincerely, but without putting extra pressure on them.     

FORECASTING FDI EQUITY INCOME FOR THE DANISH BALANCE OF PAYMENTS

Late and significant revisions are often observed in FDI equity income in many countries, hampering the quality of preliminary balance of payments statistics. We test a range of models on Danish data and find that forecasts for FDI equity income based on a combination of past profitability and consensus data for changes in expected private consumption growth outperform forecasts solely based on historical profitability. When the refined models are applied to the Danish balance of payments, the largest improvements are observed for outward and inward FDI separately. Revisions of net FDI equity income only decrease marginally because the significant revisions in gross terms resulting from the historical models have a tendency to (partly) cancel out each other on a net basis.     

Orientations Toward Consumerism: A Test of a Two-Dimensional Theory

Some past studies concerning attitudes toward consumer public policy issues have attempted to distinguish characteristics of consumerism supporters from those of nonsupporters. Results to date have been largely inconsistent. This study incorporates a solution preference dimension into the supporter/nonsupporter analysis in order to help resolve past identification anomalies and to suggest a theoretical explanation for diverse orientations. More specifically, a two-dimensional theory of consumerism orientations is developed and tested as a special case of Rokeach's broader Two-Value Theory of Political Orientations. The survey data presented tend to general support the hypothesized theoretical structure.     

Funeral Price Disclosure in an Urban Market

During telephone interviews in which funeral directors were asked to provide the least expensive option for a fixed list of services, substantial price dispersion among providers was found. Prospective customers were quoted higher prices than were quoted to consumer researchers. The cost of cremation was one-fifth that of earth burial, and cemetery charges amounted to more than one-half of earth burial costs. A memorial society member was quoted lower prices than were available to private customers of the same firm, and lower prices in relation to other funeral providers. These surveys were supported in an examination of actual funeral bills for memorial society members.     

The Impact of Comparative Food Price Information on Consumers and Grocery Retailers: Some Preliminary Findings of a Field Experiment

There is reason to believe that consumers face a difficult task in securing adequate and accurate information upon which to judge relative price levels of competing foodstores. The objective of the research reported here was to investigate the potential of retail food price reporting for correcting this information problem. Both consumer and grocery retailer responses to this comparative food price information were analyzed. A pretest-post-test design with four pairs of experimental-control cities (with replications at two levels of concentration) was employed to collect price data. A modified Solomon-four group design was used for surveys of food consumers in experimental and control cities. The results of analysis of variance models lend support to the hypothesis that price reporting can lower the relative level of food prices, both for items individually identified in a price report and items not identified in the report. The magnitude of this effect varied among the cities. It appears that consumers' role in this experiment was a passive one: consumer behavior and patronage patterns did not change in a manner that would consistently reinforce the competitive effects of the price reports.     

Quality,Choice, and the Economics of Concealment: The Marketing of Lemons

The quantity of hazardous or ineffective products on national and international markets is higher than can be explained by current theory. Research has shown that “lemons” can indeed occur and it has specified roles for (a) potential future purchases and (b) seller reputation. This paper explores incentives facing sellers of goods containing one or more negative characteristics. The economics of concealment provides the conditions under which some sellers use resources to interfere with quality signals. This allows, at the extreme, a class of product which is a “pure lemon” in that its very existence would not be justified if consumers were fully informed. The paper identifies important variables which have direct policy implications for regulation and for consumer welfare.     

The Impact of Retirement on Household Leisure Expenditures

Household leisure expenditures for retired and near‐retired households were examined in order to better understand the dynamics associated with the move to retirement status. Data from the 1995 Consumer Expenditure Survey indicated that retirement, total expenditures, and education had positive impacts on leisure expenditures. For retired households, greater total expenditures and education increased expenditures, while age and the presence of earned income decreased expenditures. For near‐retired households, greater total expenditures, education, and the presence of asset income significantly increased leisure expenditures.