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2014-08-01 | Peer Reviewed

Does money talk? — The effect of a monetary attribute on the marginal values in a choice experiment

Aravena, Claudia, Peter Martinsson and Riccardo Scarpa. 2014. “Does money talk? — The effect of a monetary attribute on the marginal values in a choice experiment.” Energy Economics 44: 483-491.
Download reference Doi:10.1016/j.eneco.2014.02.017

When designing choice experiments for nonmarket valuation the role of the price attribute is of major importance. In the energy sector the uncertainty of future direction of changes in prices makes it difficult to include an adequate price vector in the design.

We separately investigate the implication of using price vectors with increases and decreases in tariffs from current levels, on marginal value estimate from choice experiment data developed using prospect theory. In addition, we also analyse the effect of excluding the price vector on these marginal values. By and large, our results support the neoclassical theory as we find that the means of the conditional estimates of the marginal values of attributes are unaffected by the direction of the price change and from exclusion of the price attribute. However, the distributions show a larger spread of values when the choice experiment implies a tariff decrease, which may have policy implications.