Noise and bias in eliciting preferences

John Hey, Andrea Morone and Ulrich Schmidt

No 1386, Kiel Working Papers from Kiel Institute for the World Economy

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 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.

Keywords: WTP; WTA; Errors; Noise; Biases; Pairwise choice (search for similar items in EconPapers)
JEL-codes: C81 C91 (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Noise and bias in eliciting preferences (2009)
Working Paper: Noise and Bias in Eliciting Preferences (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1386

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