FOI Seminar 31 August 2011

Danny Campbell
(Queen's University Belfast / Visiting Scholar, FOI 8 Aug - 16 Sep 2011):

 

Choosing `buy none' in food choice analysis: the role of utility balance

(with Edel Doherty and Vikki O'Neill)

(Contact: ) 

 

Wednesday 31 August 2011, 12.30-13.30, Building A, first floor (the B.S. Jørgensen seminar room) Note day!

Abstract:

Stated choice analysis is now a widely used and accepted methodology for exploring food choice. In stated choice experiments respondents are asked to make a choice between two or more alternatives, one of which typically takes the form of a 'buy none' option. While the inclusion of the buy none or 'status-quo' alternative provides realism and ensures that the resulting welfare estimates are theoretically consistent with welfare economics, it is widely remarked that respondents can perceive this alternative differently from the other alternatives. Despite the various reasons proposed to help explain this phenomenon, the role that utility balance among the experimentally designed options plays on the tendency of respondent's choosing the 'buy none' option has largely been overlooked. The argument put forward in this paper is that, as the degree of utility balance between the competing alternatives increases, making a choice between them becomes increasing burdensome and that this may lead to a higher propensity of respondents choosing the 'buy none' option. To accommodate this issue, in this paper we use a non-linear representation of utility to isolate the impact of utility balance on the `buy none' choices. Moreover, since the degree of utility balance is respondent-specific, we opt for a specification that accommodates the random taste variation. We further acknowledge that this type of heuristic may not be associated with all respondents and, thus, our modelling approach is aimed at retrieving probabilistic estimates of this type of behaviour. Results, based on an empirical dataset exploring the demand for value-added services to food, reveal that a significant share of the 'buy none' choices are likely to have been as a consequence of the degree of utility balance among the other alternatives. Results further show that accounting for this leads to gains in model fit and that failing to account for it has implications for market predictions.