Noise and bias in eliciting preferences

Arbeitspapier

In the context of eliciting preferences for decision making under risk, we ask the question: "which might be the 'best' method for eliciting such preferences?". It is well known that different methods differ in terms of the bias in the elicitation; it is rather less well-known that different methods differ in terms of their noisiness. The optimal trade-off depends upon the relative magnitudes of these two effects. We examine four different elicitation mechanisms (pairwise choice, willingness-to-pay, willingness-to-accept, and certainty equivalents) and estimate both effects. Our results suggest that economists might be better advised to use what appears to be a relatively inefficient elicitation technique (i.e. pairwise choice) in order to avoid the bias in better-known and more widely-used techniques.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Kiel Working Paper ; No. 1386

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Individual ; Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
• Subject: WTP ; WTA ; Errors ; Noise ; Biases ; Pairwise choice ; Entscheidung bei Risiko ; Experiment ; Modell-Spezifikation ; Statistischer Fehler ; Präferenztheorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hey, John Denis ; Morone, Andrea ; Schmidt, Ulrich
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW)
• (where): Kiel
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/4098