Working Paper 878
The approach and survey used to examine non-market value in a stated preference study can influence the outcomes and impact the validity and reliability of value estimates. While prior research has investigated the impact of ‘price framing’ on decision-making in other disciplines, (i.e. marketing & psychology), little is known about its validity and reliability in Discrete Choice Experiments (DCEs) and environmental valuation. The study explores the effect of ‘price framing’ on DCE measurements. The tests are carried out using data from a choice experiment on preferences for natural preservatives in wine. The same respondents completed a nearly identical DCE survey, one with a real price and another with a percentage price change as cost attribute. 611 respondents completed the survey, and a panel mixed logit model was used for the analysis. Results demonstrate that ‘price framing’ remarkably influenced respondents WTP changes in attributes. The data reveals that while the rank order of importance of attributes, signs, and significance levels are similar for the two samples, they differ in the parameter magnitudes. The study sheds light on the establishment of guidelines for developing valid cost attributes in DCEs studies.
Keywords: Price framing, Discrete Choice Experiment, Mixed Logit Model
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