Revealed Preference Approach Research Articles

Do Firms Value Court Enforceability of Noncompete Agreements? A Revealed Preference Approach

Abstract Do firms value court enforceability of their workers' noncompete agreements (NCAs)? We leverage a 2020 Washington law that made NCAs unenforceable for workers earning less than $100k per year. If firms value the ability to enforce NCAs in court, then they should give just-below threshold workers raises to reach the threshold, resulting in excess mass just above the threshold. Using administrative data, we find no evidence of bunching, even where efficiency arguments are most plausible. A survey of Washington employment attorneys suggests little bunching because firms rarely need to enforce NCAs and because firms can use other, less restrictive alternatives.

‘Generation Share’ versus ‘Generation Rent’: Analysing the spatial preferences of shared rental housing

A growing number of young adults are choosing to live in private rental housing and sharing with unknown individuals in order to reduce their housing expenses. However, young housing sharers are generally treated as homogeneous to other renters in academic research and policy formation, leaving some of their unique housing issues unaddressed. This study examines how young housing sharers differ from their counterparts living in conventional or unshared rental housing. More specifically, we compare the spatial preferences of housing sharers to the spatial preferences of conventional housing renters, using a unique dataset of over 0.8 million private rental housing records collected in Shanghai, China. The results using a revealed-preference approach based on a hedonic pricing model demonstrate significant differences in their preference for location characteristics. Housing sharers are more willing to pay for proximity to employment centres and metro stations than conventional housing renters. Following the outbreak of Covid-19, the difference has narrowed to some extent, and housing sharers have moved further from employment centres. Rather, housing sharers are less concerned about access to public and private service amenities. The findings of this study contribute to our understanding of the recent housing tenure shift toward sharing among the younger generation and its potential impact on age-related segmentation in the housing market.

The Gender Gap in Household Bargaining Power: A Revealed-Preference Approach

The Gender Gap in Household Bargaining Power: A Revealed-Preference Approach

Is environmental consciousness associated with organic food consumption?: A revealed preference approach

AbstractThis study analyzes NielsenIQ household scanner data, exploring the environmental motivation behind organic food consumption using single‐use plastics spending as a proxy for environmental concern. To investigate the relationship between the two environmental behaviors, organic food and single‐use plastic, the study utilizes the instrumental variable approach to account for the potential endogeneity in revealed preference data. Results show a significant negative association between single‐use plastic and organic food purchases, underscoring environmental concern as one of the motives for choosing organic foods. The findings indicate that organic food marketing should emphasize environmental benefits to appeal to environmentally conscious consumers.

Rankings without U.S. News: A revealed preference approach to evaluating law schools

AbstractSince their inception in 1989, the U.S. News & World Report law school rankings have influenced how schools, students, and the legal profession itself think about legal education. In the Fall of 2022, however, several of the most selective law schools formally withdrew from the annual rankings. In so doing, these schools laid bare longstanding criticisms of the rankings' questionable criteria and opaque methodology. While the long‐term effect of this boycott remains to be seen, school rankings are likely here to stay. In this Article we design a more informative approach to rankings, based on actual decisions students make. Using individual‐level data provided by the Law School Admissions Council (LSAC), we analyze the universe of applicants to U.S. law schools for the period 1988 through 2017. In so doing, we are the first to create a revealed preference ranking based solely on where applicants matriculate given offers of admission. Our approach relies neither on potentially faulty data collection from schools nor arbitrary decisions about which factors to emphasize in rankings, thereby minimizing the scope for manipulation. It also allows us to quantify the magnitude of differences in preferences among schools and to test their statistical significance. Matriculants reveal a strong preference for a handful of the most selective schools; outside of the top tier, however, matriculants do not appear to draw meaningful distinctions between schools ranked adjacently or even near to each other. While existing school rankings sow more confusion than clarity, our analysis provides a rigorous and transparent alternative, and a blueprint for redesigning school rankings.

Effect of Socio-Economic and Institutional Factors on Different Choices of Food Production System Practiced in Home Gardens: A Case Study in Mahakanumulla Village Tank Cascade System

The global existence of small-scale food production at the household level has a wide range in terms of physical appearance and utilization. Household, market, and field gardens can be identified as three types of home food producti on systems in a village tank cascade system (VTCS) in the dry zone of Sri Lanka. The variation in food producti on systems adapted in VTCS serves differently for the community either by providing nutrient requirements or ensuri ng financial or food security. It is important to understand the determinants of this variation to support the comm unity to adapt the most suitable food production system for their well-being. Based on random utility theory, this study analyzes the socio-economic and institutional factors affecting the choice of food production system practiced in home gardens in Mahakanumulla VTCS. A revealed preference approach was employed to identify the current home garden choice of households. The decision to have a ho usehold garden is more driven by socio-economic and institutional factors rather than market gardens and field gard ens. The effect of these factors on the decision to have a field garden is comparatively less. Using these results policymakers can predict farm management decisions of households and plan evidence-based strategic governm ent intervention to meet the daily nutrient requirement, ensure food security, and mitigate food scarcity.

Measuring Information Frictions in Migration Decisions: A Revealed-Preference Approach

Measuring Information Frictions in Migration Decisions: A Revealed-Preference Approach

Estimating the Total Annual Economic Loss Attributed to Climate Variations in Agusan Marsh Wildlife Sanctuary: The Case of Fishing and Farming Activities in Talacogon, Agusan del Sur, Philippines

The cost of alterations in the quantity or quality of ecosystem services (ES) that are traded on commercial markets can be approximated with the aid of a revealed preference approach, such as the market price method. This study used the market price method to estimate the total annual economic loss from the changes in the demand and supply of fish and crops due to climate variations in Agusan Marsh Wildlife Sanctuary (AMWS). Household interviews were done in the municipality of Talacogon using four sets of structured survey instruments to gather information such as the quantity supplied monthly by fisherfolks and farmers as well as the quantity demanded by residents at different market prices. The consumer surplus and producer surplus during peak and off-seasons were calculated to estimate the annual loss in economic benefits to consumers and producers. The most commonly consumed and produced products in terms of fishing and farming were Channa striata and Oryza sativa L., respectively. Climate variations have an impact on both fishing and farming commercial activities. During the dry season (March to August), fewer fish are caught due to low water levels in rivers and lakes, while crops cannot be planted during the wet season (September to February) because a lot of land areas are flooded. The total annual economic loss was calculated at PHP 99,974.50. This estimated monetary value can be a basis for decision-makers and concerned stakeholders to efficiently allocate funds for sustainable programs to capacitate the fisherfolks and farmers to increase adaptation mechanisms for climate variations.

How Does a Firm Adapt in a Changing World? The Case of Prosper Marketplace

We propose a generalized revealed preference approach to infer how agents use past data to adapt in a changing environment.

Role of car segment and fuel type in the choice of alternative fuel vehicles: A cross-nested logit model for the English market

In this article, we study the role of car segment and fuel type in the choice of alternative fuel vehicles and in the prediction of its market. For this purpose, we propose a joint choice cross-nested logit model to understand the demand for alternative fuel vehicles (AFV) and to study substitutional patterns between fuel types and vehicle segments with a full revealed preference approach, using only publicly available real data at disaggregate (household) level in England. Our results show that, as hypothesised, fuel type choice is not independent from car segment choice. The correlation patterns in the chosen specification reveal that individual car alternatives belonging to the same car segment are strongly correlated, while a weaker correlation exists between alternatives from different segments which share the same fuel type. The results suggest that creating awareness for cleaner fuel alternatives might be more effective if a targeted approach that considers these substitutional patterns is used. From a policy standpoint, while purchase prices play an important role and government policies have been concentrated in reducing the gap between ICE vehicles and AFVs in this dimension, our models stress the relevance of the operating cost variable, suggesting that its effect might also be crucial in the purchase decision.

The Analysis of Willingness to Accept and Willingness to Pay of Farmers and Consumers on Organic Horticultural Commodities Through Android Application-Based Digital Marketplace

Purpose: This study aims to analyze farmers' and consumers' willingness to accept and willingness to pay for organic horticultural commodities through an Android application-based digital marketplace. Theoretical Framework: Parameters in the economic assessment of natural resources and the environment involve how much individuals are willing to pay (WTP) and receive (WTA) Economic valuation methods for natural resources and the environment can be grouped into two types, namely the revealed preference approach and the stated preference approach The implied preference approach includes several techniques, such as the Travel Cost Method, Hedonic Pricing Method, and Averting Cost. On the other hand, the techniques included in the expressed preference approach involve the Contingent Valuation Method (CVM) and Conjoint Analysis. Method: This study was conducted in Semarang and Magelang Regencies, Central Java Province. The number of samples interviewed was 110 respondents spread across the two districts. The number of samples in each district was 55 respondents of producer farmers who are accustomed to growing organic horticulture and at the same time as consumers of organic horticulture. The analysis of users’ WTP and WTA of organic horticulture offered to the respondents. Results: The estimated Result of WTP Parameters of the characteristics of the product offered is one of the factors which can affect consumer willingness to pay (WTP). Consumer backgrounds such as income, number of family members, and education can also affect consumers' WTP of a product. In general, the determining factor for consumers’ WTP to be willing to pay more for organic horticulture through a digital marketplace compared to conventional horticulture is better quality. Conclusions: Consumer preference for organic horticulture is positive because the quality and taste are better than horticulture that has been planted before. Organic horticulture has the opportunity to create a market due to the positive response of producers and consumers as indicated by the WTA and WTP.

Entrepreneurial Migration

Abstract We track the movement of high-potential startups using cross-state business registrations and estimate the utility of cities to moving startups using a revealed preference approach. 6.6% of these startups move across state borders during their first five years. Startup hubs like Silicon Valley and Boston tend to lose startups to other cities. Our findings show that startups prefer traditional hubs when they move soon after being founded, but later prefer cities with lower taxes. This pattern is not due to vertical sorting or industrial specialization.

Experienced versus decision utility: large‐scale comparison for income–leisure preferences*

AbstractSubjective well‐being (SWB) data are increasingly used to perform welfare analysis. Interpreted as “experienced utility”, it has recently been compared to “decision utility” using small‐scale experiments most often based on stated preferences. We transpose this comparison to the framework of non‐experimental and large‐scale data commonly used for policy analysis, focusing on the income–leisure domain where redistributive policies operate. Using the British Household Panel Survey, we suggest a “deviation” measure, which is simply the difference between actual working hours and SWB‐maximizing hours. We show that about three‐quarters of individuals make decisions that are not inconsistent with maximizing their SWB. We discuss the potential channels that explain the lack of optimization when deviations are significantly large. We find proxies for a number of individual and external constraints, and show that constraints alone can explain more than half of the deviations. In our context, deviations partly reflect the inability of the revealed preference approach to account for labor market rigidities, so the actual and SWB‐maximizing hours should be used in a complementary manner. The suggested approach based on our deviation metric could help identify labor market frictions.

Public preferences for government supply of public open space: A neo-institutional economic and lifecycle governance perspective

There is a global trend urging countries to allow for and even rely on private supplies of public open spaces. However, the opinions of their end users have seldom been sought. Based on questionnaire surveys and hedonic price model, this study shows how the mode of governance (government or private supply), from a lifecycle perspective, affects the quality of and public preferences for government-owned open spaces (GOS) versus privately-owned open spaces (POS). Both stated preference and revealed preference approaches were used since triangulation of the results from both approaches can enhance the reliability of the conclusion. Theoretically, the high transaction costs of outsourcing POS through market contracts leave room for POS providers to optimize their own benefits at the expense of public interest. Based on the case of Hong Kong, the results showed that the public tends to prefer GOS over POS and this is consistently found in stated and revealed preferences. Parks and gardens in GOS were generally perceived to be the best performers, while POS excelled in landscaping but less so in social inclusiveness and vital activities. The preference-governance relationship is intricately affected by managerial capacity, fiscal situations, contracting costs, market competitiveness, characteristics of the quality attributes, etc.

Valuation of Environmental Services City Park 1 BSD Using the Travel Cost Method (TCM) and Willingness To Pay (WTP)

BSD City Park 1 has quite complete functions, including ecological, social, and aesthetics, as well as is also a city landmark and a cheap and healthy tourist attraction for residents, including visitors from outside BSD City. The study aimed to find the factors that influence the number of public visits to City Parks and to determine the value of environmental services from City Park 1 BSD through a revealed preference approach using the Individual Travel Cost Method (ITCM) and Willingness To Pay (WTP). Economic valuation through revealed preference using the Travel Cost Method (TCM) calculation, the individual Consumer Surplus value is IDR 55,664/visit with an average stay of 4.8 personal holidays per year. If it is estimated that there are 104,150 visits/year, the Economic Value of City Park 1 BSD is estimated at IDR 5,797,422,757/year. The Willingness to Pay (stated preference) analysis results for additional facilities include the average individual WTP for other sports facilities of IDR 7,619.00; The average particular WTP for adding the number of trash cans is Rp.7,619.00; The average individual WTP increases the number of toilets by IDR 15,000.00.

Revealing preferences for urban biodiversity as an environmental good

Biodiversity is essential for human well-being, but little is known about urban dwellers’ preferences and willingness to pay (WTP) for urban biodiversity. Since a large share of the global population concentrates in cities, urban areas are a critical space where humans and nature interact and biodiversity-related preferences are formed. This study investigates urban dwellers’ WTP for biodiversity using a revealed-preference approach on a real estate dataset of approximately 140,000 unique entries of rental and sales transactions of apartments. Three biodiversity indicators were used to investigate heterogeneous preferences for biodiversity as an environmental good. The findings indicate that WTP for biodiversity is positive and economically significant. This implies that urban biodiversity conservation and enhancement can result in co-benefits for the local urban population. Moreover, this study identifies a satellite-based biodiversity indicator as a potential alternative to conventional species richness indicators. This finding is significant for benefit transfer studies and primary biodiversity valuation in regions with limited data availability. The results can inform biodiversity conservation and management decisions by highlighting the importance of incorporating urban biodiversity in biodiversity policies.

Estimating social preferences using stated satisfaction: Novel support for inequity aversion

Experimental identification of social preferences often uses a revealed-preference approach, whereby participants make choices over payment distributions for themselves and others. We introduce an alternative “stated satisfaction” approach: participants directly report their satisfaction with various payment-profiles that hold their own payment constant while varying another participant's payment. We then use our data to estimate the unrestricted parameters of the Fehr and Schmidt (1999) model to determine participants’ social preferences. While the Fehr and Schmidt parameter-assumptions make it a model of inequity aversion, alternate parameter-assumptions can reflect different social preferences. Our methodology yields support for the Fehr and Schmidt assumptions (i.e., that both disadvantageous and advantageous inequity are utility-diminishing, the former more so than the latter) at both the aggregate and individual levels. Methodologically, eliciting satisfaction can be an easy-to-implement complement to choice-based preference-measures in contexts other than social preferences that are of interest to economists.

Are rural residents willing to trade-off higher noise for lower air pollution? Evidence from revealed preferences

The rise in urbanization has led to an expansion of traditional urban externalities toward suburban and rural areas together with changes in the preferences of human populations for noise and air pollution. This paper analyses the preferences of the population living in rural, suburban and urban areas for noise and air pollution utilizing a revealed preference approach. Data on actual choices of residential location are analysed utilizing a Latent Class Discrete Choice model that raises two different groups of residents with different preferences for air and noise pollution. As expected and confirmed by the Multinomial and Mixed Logit models, the first group of the Latent Class model accepts higher levels of noise and air pollution in urban than in suburban and rural areas. However, the second group of residents have preferences for higher levels of noise and lower levels of air pollution in rural and suburban than in urban areas. Thus, results show some rural residents are willing to trade higher levels of noise for lower levels of air pollution, indicating adaptation of preferences to a lower level of the traditional tranquillity enjoyed in less densely populated rural areas.

Do Firms Value Court Enforceability of Noncompete Agreements? A Revealed Preference Approach

Do Firms Value Court Enforceability of Noncompete Agreements? A Revealed Preference Approach

Latent Utility and Permutation Invariance: A Revealed Preference Approach

Latent Utility and Permutation Invariance: A Revealed Preference Approach