Do status quo choices reflect preferences? Evidence from a discrete choice experiment in the context of water utilities' investment planning

Bruno Lanz and Allan Provins ()

No 12-87, CEPE Working paper series from CEPE Center for Energy Policy and Economics, ETH Zurich

Abstract: Discrete choice experiments are increasingly being used to assess preferences for services provided by regulated utilities. A commonly observed tendency of customers to opt for the status quo option may signal unwillingness to trade-off changes in service levels with bills, questioning the welfare theoretic interpretation of stated choices. In this paper, we examine status-quo choices and systematic non-trading behaviour in a discrete choice experiment encompassing a wide range of water-related service attributes. Our analysis is novel in several dimensions. First, we use a split sample design to vary the description of the status quo and the survey administration mode (online vs. in person). Second, we define service attributes to span both improvements and deterioration, so that the status quo is not necessarily the least-cost alternative. Third, we elicit information about the perception of the status quo and the impact of service attributes on day-to-day activities. Our results suggest that status quo choices largely reflect preferences.

Keywords: cost-benefit analysis; regulated utilities; economic valuation; discrete choice experiments; individual decision making; status quo effects (search for similar items in EconPapers)
JEL-codes: C35 H4 L43 L95 Q25 Q51 Q58 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2012-09
New Economics Papers: this item is included in nep-dcm and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Using discrete choice experiments to regulate the provision of water services: Do status quo choices reflect preferences? (2015)
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