Noise and Bias in Eliciting Preferences

John Hey (), Andrea Morone () and Ulrich Schmidt

Discussion Papers from Department of Economics, University of York

Abstract: 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 magnitutdes of these two effects. We examine four different elicitation mechanisms (pairwise choice, willingness-to-pay, willingness-to-accept, and certainty equivalents) and estimate both effect. 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 trhe bias in better-known and more widely-used techniques.

Keywords: Pairwise choice; willingness-to-pay; willingness-to-accept; errors; noise; biases (search for similar items in EconPapers)
JEL-codes: C91 C81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-dcm and nep-upt
Date: 2007-02
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Related works:
Working Paper: Noise and Bias in Eliciting Preferences (2007)
Journal Article: Noise and bias in eliciting preferences (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:yor:yorken:07/04

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