CE research: summary

In 2003, Bhat wrote of ‘renewed excitement in the field’ of discrete choice modelling (Bhat, 2003) because of the progress that researchers were making. There have been various choice

experiment researchers extending this technique, and the above review has discussed several areas of advances in CE research. One important area is in removing or dealing with a number of known biases in SP methods. For example, the ‘cheap talk’ technique and calibration research are attempting to remove or compensate for hypothetical bias. Another important area of research is improved analytical tools. The GEV and RPL methods described above represent the most recent methods. They have even been combined into the mixed GEV, or MGEV, model (Bhat, 2003). A final important frontier in discrete choice analysis is

expanding the model of decision-making. A Hybrid Choice Model (HCM) has been proposed (Ben-Akiva et al., 2001) as a way of integrating economics, sociology and psychology. The aim is to develop practical models beyond RUM theory to incorporate insights from the study of cognitive processes.

It appears that CE methods could be used to address the issues surrounding consumer behaviour with regard to GMF that were raised in Chapters 2 and 3. One issue to consider is whether preferences over food attributes may be considered separable. Two examples in the literature of models that include attribute interactions are Gerard, et al. (2003) and McFadden & Train (2000), both of which estimate two-way interactions of choice attributes. In the first paper, the interactions are not significant, while they are found to be significant in the second paper. Furthermore, survey design techniques that may generate the appropriate data for exploring preference separability are available (Halbrendt et al., 1994; Louviere et al., 2000). The above research appears to demonstrate that assessing the preference separability is a concern of both survey design and modelling, which may be an important insight for considering attribute interactions in the choice of GMF.

The second issue to consider is the assumption of continuity. One consequence of assuming continuity is that protest responses may be viewed as intransigence on the part of respondents. Because respondents should in theory be willing to view different attributes as commensurate,

the fact that their response patterns do not reveal trade-off behaviour results in the exclusion of their responses. It may be interesting to explore these types of responses in more detail, especially as they may represent 20 per cent to 30 per cent of respondents to CE surveys on GMF. If protest responses are not arising from economically valid reasons, i.e., the

respondent would not have a similar reaction in a market situation, then excluding the

responses in an estimation of economic impacts appears to be appropriate. However, if protest responses in a survey situation are motivated by preferences or behaviours that would carry over into a market situation, then it may be appropriate to include those responses in an economic estimate (Blamey, 1998a; Lindsey, 1994; Yoo et al., 2001). In the case of GMF, prior research appears to suggest that some consumers are opposed to the use of gene

technology in food production, as discussed in Chapter 2. It may be expected that their market behaviour would reflect that stated belief. This suggests that there may be scope in SP

research on GMF for allowing respondents to express discontinuous preferences with regard to the GM in such a way that their responses are not considered protest responses. It may be possible to consider possible violations of continuity in the design of a CE survey.

Another consequence of assuming continuity is that lexicographic choices are problematic for CE research. Data analysis assumes a compensatory model of decision-making. The different elements that go into a decision are held commensurate: they can all be measured on a single scale. This commensurability operates on two levels, at the level of the attributes and at the level of the whole alternative. Commensurability at the attribute level is clear in the equations for the deterministic portion of utility, which are linear in attributes even as the error

structures are made more complex. Commensurability at the alternatives level is clear in the basic RUM preference inequality:

(

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(

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In order for this inequality to have any meaning at all, the values on the left-hand side need to be comparable to or commensurate with each other. If the two options are strictly speaking incomparable, then this inequality makes no sense. For example, the following operation is nonsense because the quantities are measured on incommensurate scales:

10 pounds – 3 yards = ?

Current CE practice circumvents the issue of potentially lexicographic choices by assuming that preferences are indeed compensatory, but that the point of indifference at which one element is finally equal to the other is outside the levels of the attributes used for the choice set. Thus, one uses the information available within the bounds of the choice set to extrapolate about preferences outside those bounds. Another approach might be to assume that

lexicographic choices are the results of non-compensatory preferences or strategies. Swait & Adamowicz (2001) have in fact identified the study of non-compensatory decision strategies as an area of future research.

A discussion of continuity leads naturally to the issue of aggregation. If it is not possible to determine the point at which an individual is indifferent between, for example, having GMF at a discount and having more expensive non-GMF, then it is not possible to monetise that person’s indifference. Similarly, unless it can be shown that utility can be measured cardinally, then it is not possible to measure the utility that one person receives from consuming non-GMF. Without measurements of the monetary value or the cardinal utility value of non-GMF, it is not possible to compare the gains and losses to consumers that could occur in the market for a food product from the introduction of GM technology in food production. It would be possible to make some judgements about the WTP on the part of some consumers or about possible market penetration of some products, but statements about

average discounts or welfare impacts – statements that require knowledge about all consumers – are theoretically impossible.

A final issue with CE research is the assumption of maximisation as the framework for modelling decision-making. In the choice situation diagram in McFadden (1986), ‘decision protocol’ is one of the variables affecting choice. The text, however, skips over how different decision protocols could be used, what they are, and how they could be modelled. Instead, a consumer is said to have ‘a protocol to maximize preference taking into account the

opportunity cost of the outlay for the product’. This description of consumer behaviour does not consider the decision processes that consumers might use. It also discusses ‘maximising preferences’, although it is not preferences that are maximised in RUM theory. Utility is maximised, subject to fixed and stable preferences. The same issue is apparent in the Hybrid Choice Model (Ben-Akiva et al., 2001). The authors appear to intend that the HCM bring sociology and psychology into economics, but they also appear to focus on random utility maximisation and do not seem to include research on the cognitive processes that people might use in making decisions. In his Nobel address, McFadden (2001b) addresses the issue of rule-based choices or alternative decision protocols, but in the end maintains that the standard RUM model, with a few modifications, is the appropriate approach. The overall effect is what Boland (1981) called an unassailable all-some statement: ‘All people maximise something.’ This appears to remove a critical consideration of the maximising decision protocol from the realm of research questions.

These issues with CE research all arise from its foundation in neoclassical economic theory. They are also issues that have been examined by theories of bounded rationality, theories which were introduced in an earlier chapter. To extend CE practice in order to consider the issues raised by consumer reactions to GMF, it may be valuable to consider research from this area of economics.