INSPiRE · The Influence of Information Search on Preference Formation and Choice

Cost-benefit analyses are routinely used by policy makers when designing environmental policy to weigh the costs and benefits of different policy alternatives, and stated choice experiments are used to value the non-marketed costs and benefits included in such analyses. Standard practice in stated choice experiments is to create a hypothetical market environment in which people choose among competing policy alternatives under the assumptions that they have complete information about all available policy alternatives, and that they are perfectly rational and maximize utility based on a clearly defined set of preferences, which can be retrieved when needed in any choice situation. In reality, these assumptions are questionable. Drawing on accumulating evidence from economics, psychology and marketing, this project aims to understand how searching for information about policy alternatives affects stated preference formation, learning and choice, and the extent to which this can address hypothetical bias. The project develops a novel experimental procedure that addresses important issues in stated choice experiments and make significant and original methodological contributions that advance current practice beyond state-of-the-art in both experimental design and data analysis. Improving the reliability of stated choice experiments will lead to improved estimates of non-marketed costs and benefits included in cost-benefit analyses. Through a broad uptake and use of these methods by stated preference practitioners, and increased awareness among policy makers, the methodological developments in this project can lead to improved policy recommendations and implementation across the EU.