Interdisciplinary Choice Workshop

Universidad de Chile, 7-10 August 2018, Santiago

Modelling with Chained SC Data:

Experienced vs Decision Utility and Double Choices

Juan de Dios Ortúzar

Department of Transport Engineering and Logistics
Institute in Complex Engineering Systems
Pontificia Universidad Católica de Chile
E-mail: jos@ing.puc.cl
Contents

 Introduction

 Experienced vs Decision Utility

 Three Experimental Chained SC Designs

 Conclusions
Introduction

• Highly creative and skilled collaborators are surely one of the best assets for
success. For this presentation I wish to thank four such guys:

– José María Grisolía, at Universidad de Las Palmas de Gran Canaria

– David E. Palma, at the Choice Modelling Centre, Leeds University
– Luis I. Rizzi, at Pontificia Universidad Catolica de Chile, and
– Natan Waintrub, now doing a PhD at UCL.

• With them, in the last years I have been involved in studies requiring what I
have called here: “chained stated choices”

• In search of a sexy title, my real aim was to show how interdisciplinary we

can be. Also of interest was that chained SC experiments are not that
common (Hensher et al., 1997; Lange et al., 2000).
Introduction

• Format can be:

– classic: ask people to choose before and after tasting (i.e., experience) takes place in, for
example, food choice or,
– more general: true chained choices, as we will see below .

• Experiments require, as usual, a careful setting and design

• Also care, as respondents face two or more choice instances, where a response to an
earlier choice situation may condition the next
• We may model as famously suggested by Train and Wilson (2008) for pivot SC designs,
but there may also be further complications
• We present three examples, showing the various forms this can take, in contexts as
different as food and housing development.
Experienced vs Decision Utility

• Bentham (1789) – how many have gone to UCL?

• Utility = sum of pain and pleasure experimented by one individual; a

cardinal utility measured when the individual is experiencing it.

• Hicks and Allen (1934) suggest instead the neoclassical approach, an

ordinal utility that allows ranking different options.

• Bentham's utility has been called experienced utility, whereas the

neoclassical approach is known as decision utility, and is based on the
observation of people’s choices.

• Robson and Samuelson (2011) argue that decision utility is what

drives individual choices, whereas experienced utility relates to what
is actually perceived once choices are made.
Experienced vs Decision Utility

• Most microeconomics advances have been founded on neoclassical utility

paradigm; but always criticised for lack of realism

• Kahneman and colleagues (e.g., Kahneman and Sugden, 2005) consider

that as decision utility provides only a ranking, it cannot be a good
instrument to measure welfare

• In addition, people may change preferences because they get used to

new situations

• Kahneman and colleagues proposed to use experienced utility instead.

• In two of the experiments explained below we attempted to contrast

differences in utility before and after a real sensory experience with a
food, generating a response closer to the concept of experienced utility.
Three Experimental Chained SC Designs

Introducing Sea Urchin in the Spanish market

• The black and covered in long-spines sea urchin (Diadema Antillarum
Philippi) is an herbivorous that plays a key role in the structure,
diversity and composition of the mega-invertebrate community on
rocky bottoms and reefs along both sides of the Atlantic Ocean.
Three Experimental Chained SC Designs
Introducing Sea Urchin in the Spanish market
• The black and covered in long-spines sea urchin ( Diadema Antillarum Philippi) is an
herbivorous that plays a key role in the structure, diversity and composition of the mega-
invertebrate community on rocky bottoms and reefs along both sides of the Atlantic Ocean.
• In the Canary Islands and Madeira, the high population of sea urchins, with densities that
could reach up to 80 individuals/m 2, was considered a plague by local authorities due to its
clear relationship with decreasing fish richness.

• In Latin America, instead, the sea urchin is a delicacy greatly appreciated by sea food
lovers (you should all try it!), but in Spain it was mostly not eaten at the time of this study.
Three Experimental Chained SC Designs
• The Spanish Ministry of the Environment and the Canary Islands Government financed
a project to control this “plague” via its transformation into a fishery resource.

• The viability of the species as a resource, depended on the possibility of exporting it

or consuming it in the local market. Export markets for sea urchin were currently well-
known but there was much unknown regarding the local market.

• We set a stated choice (SC) experiment with the feature of having an intervention,
half way through, where participants took part in a tasting experience of sea urchin.
This allowed us the chance to discuss the differences between perceived and
experienced utility (Grisolía et al., 2012).
Three Experimental Chained SC Designs

• The experiment had two stages:

• Individuals were asked to look at pictures and evaluate attributes through their remembered (or
expected) experience (part of the sample had never tried sea urchin), for 6 of 12 SC situations
coming from an efficient design.

• After tasting the product (cooked in similar dishes to those presented in the SC experiment),
respondents were asked to make a second set of choices using the remaining 6 choice situations.

• We tracked individual responses before and after their actual tasting to capture, somehow,
differences in their responses.

• We wished to analyse contextual influences that had received little attention in food models,
plus attributes and levels revealed at focus group sessions; we finally included the following
attributes:
Three Experimental Chained SC Designs

Attributes Levels of variation

Place Restaurant; Home; Bar

Price (€) 7; 10; 12; 14; 15; 18; 20 and 25

Recommendation Chef; Friend; None (base)

Information Health claim; Nothing (base)

Presentation With shell/ No shell (base)

Mood Happy; Sad; Neutral (base)

Three Experimental Chained SC Designs
• Survey conducted taking advantage of a “sea urchins culinary week”; midday and evening
sessions (lunch and dinner) among guests attending two restaurants in Gran Canaria and
Tenerife.

• 115 randomly selected volunteers interviewed; evenly distributed by gender and location
(i.e. Gran Canaria and Tenerife). About 47% of them had never tried sea urchin in the past.

• We modelled the before (B) and after (A) choices jointly with a ML model:
• scale factor for the A data (not different from one);
• allowing for correlation among choices made by each individual (significative);
• specified different ASC for the B and A data, finding no difference for the ASC of the “other”
alternative.
Main results of first experiment
• Difference in some coefficients for B and A models were significant, implying that preferences were
not stable (as expected)
• ASC of sea urchin increased after tasting (more interest in the product)
• Friend and Chef (which reduce level of risk when product is unknown) lost significance after tasting
• Mood was only important after tasting.

• Heterogeneity in tastes:
• In some cases for Gender and Income
• More systematic for Chef, which is more appreciated by Women and Young
• Women also pay more attention to the Health claim.

• WTP of sea urchin near € 27.4 if served in restaurant.

Three Experimental Chained SC Designs
Choice of Wine mimicking reality and more
•Interest in finding relative importance of extrinsic and intrinsic wine attributes (Palma et al., 2018).

•Part of 4-year project with people from Chemistry and Bioprocess, and Sensory Studies (Centre for
Aromas and Flavours). Several experiments as discussed by David at noon, in particular the “triple
experiment”:
• Choose wines (rank up to six different bottles) from a shelf with 24 wines, selected according to an
efficient design (based on some attributes);
• Tasting of five wines (including the first three in their ranking), designed to maximise sensorial variance.
Respondents qualify them using a 1-7 Likert scale (plus some description of each: dry, stringent, well
bodied);
• Sale – the five wines tasted are revealed and respondents are offered the chance of changing their
original choices, by the new alternatives.
1
7
EXP4: Revealed preferences during repurchase

1. Participants ranked six (or

less) wines that they would
like to buy from 24
alternatives in a shelf.
1
8
EXP4: Revealed preferences during repurchase

2. Participants blind-tasted
five wines (three from
their ranking) and
provided an overall-
liking indicator and 12
sensory descriptors
1
9
EXP4: Revealed preferences during repurchase

3. Participants were shown all

information about the five wines
they had tasted (including label,
price and overall-liking rating) and
were allowed to buy up to three
bottles (repetitions allowed)
Three Experimental Chained SC Designs

•The experiment had two main virtues:

• First, it models the complete wine acquisition process, starting with the decision
to buy using only extrinsic information (and recalled experience) at the shelf,
followed by degustation and re-buying (or buying)
• The second stage simulates re-buying, as it mimics a situation where the
participant has bought a wine, tries it at home and then comes back and decides
if to buy it again or not, this time based on both extrinsic and intrinsic attributes.

• Second, the experiment provided revealed preference data (i.e., real sales data)
in a controlled environment.
Three Experimental Chained SC Designs
Defining Incentives for Real Estate Developers
• Interdisciplinary project that started with a short (4 months) study
required by the Ministry of Housing and Urbanism and ended, later,
in a two year research project, with architects and planners

• 72 real-estate developers (i.e. close to the total population)

participated in choice experiments designed to estimate willingness
to develop high-density projects, including social integration, in
vicinity of mass transport stations in Santiago

• All respondents had experience with high-density projects. But some

had no experience with mixed income projects (social integration)

• Survey combined best-worst questions with dichotomous and binary

contingent choices, in a chained SC design framework.
Three Experimental Chained SC Designs

• With government officials we designed a set of realistic incentives:

• actual money subsidies (grants of various kinds)

• the possibility of increasing constructability and density
• reducing the requirement to build parking spaces, and
• the promise of government investment in parks and urban furniture in
the vicinity of the project.

• The mass transit stations (both Metro and BRT) selected offered a
variety of settings in terms of location in the city, neighbourhood
income, and availability of sites to build the projects

• The possibility of developing more socially inclusive projects was

key as Santiago is a highly segregated city.
Three Experimental Chained SC Designs

• Each real-estate developer was presented with a set of four choice

tasks for each specific Metro or BRT station:

• determine the most attractive (best) attribute of the package, second, the
least attractive (worst) attribute, third, his/her disposition to build given all
the incentives and levels shown in the profile:
• as many were unfamiliar with social integration projects, we added a fourth
question as a way to ‘pivot’ their experience with density projects.

• This exercise was repeated 12 times for Metro stations and 15

times for BRT or mixed stations

• The final data set has 3,824 observations (2,428 corresponding to

Metro stations and 1,396 to BRT stations).
 Three Experimental Chained SC Designs
(1) Choose which of the incentives offered is most
attractive and less attractive for you.

(2) Choose if the following group of incentives generates

an attractive scenario to develop on this surroundings.

This corresponds to the name of the

Metro station or BRT stop

MOS T LES S
ATTRACTIVE
INCENTIVE
ATTRACTIVE
INCENTIVE
1º question

! Bond to any buyer with subsidy 2 Tho us and US $ !

i. best

! Limited time bond 3.2 Tho us and US $ !

2º question

! Increase in constructability factor 0% ! ii. worst

! Increase in density factor 50% !

3º question

! Reduction in minimum parking lot requirements 0% ! iii. SC

! Government investment in public spaces 1 Tho us and US $ !

Attrac tive fo r de ve lo p
Ye s
!
No
!
Yes I4
Choice task 1
 1º question
Witho ut inc lus ive
hous ing
With inc lus ive ho us ing
30-30
i. best
Bond to any buyer with subsidy 2 Thous and US$ 2 Tho us and US$
2º question
Limited time bond 3.2 Tho us and US$ 6.4 Tho us and US$ ii. worst
Increase in constructability factor 0% 30%
3º question
Increase in density factor 50% 100%
iii. SC
Reduction in minimum parking lot requirements 0% 0%

Government investment in public spaces 1 Thous and US$ 1 Tho us and US$ Yes
No
! ! I4
Choice task 1
4º question

iv. P1Yes
 MOST LES S
ATTRACTIVE ATTRACTIVE
INCENTIVE INCENTIVE

1º question
! Bond to any buyer with subsidy 2 Tho us and US $ !

i. best
! Limited time bond 3.2 Tho us and US $ !

2º question
! Increase in constructability factor 0% !

ii. worst
! Increase in density factor 50% !

3º question
! Reduction in minimum parking lot requirements 0% !

iii. SC
! Government investment in public spaces 1 Tho us and US $ !

Ye s No I4
Attrac tive fo r de ve lo p ! !
Choice task 1
YES NO
 1º question

i. best
With inclus ive ho us ing 30-30

Bond to any buyer with subsidy 2 Thous and US$ 2º question

ii. worst
Limited time bond 6.4 Thous and US$

Increase in constructability factor 30%

3º question

iii. SC
Increase in density factor 100%

Reduction in minimum parking lot requirements 0%

Government investment in public spaces 1 Thous and US$

Yes No

Ye s No I4
Attrac tive fo r de ve lo p ! !
Choice task 1 4º question

iv. P1No
1º question i. best

2º question
ii. worst

iii. SC
3º question

Yes No

4º question iv. P1Yes iv. P1No

 Main results of third experiment
• We jointly modelled the Best, Worst and SC finding that the hypothesis
of equal values for the intercept and sensitivity parameters of the
different data types were statistically the same. Also, all parameters
were significant and with the correct sign (Waintrub et al., 2016)
• We further modelled the Best, Worst and SC data jointly with the fourth
question, allowing for the endogeneity of the conditional choices, finding
again equal values for the intercept and sensitivity parameters of the
different data types, significant and with correct sign
• The scale factor for Best, Worst and P1-Yes were significantly different
from one; the scale factor for P1-No was not. The endogeneity
parameter was only different from zero for the P1-No data.
 Main results of third experiment
• According to our best model, the real-estate developers’ willingness to
develop a project with social inclusion when only one incentive is
present, was always lower than 8%
• However, if combinations of incentives were joined in packages, the
situation could improve (we also found that this depended importantly
on the location)
Group of incentives Probability of Development
Increase in constructability factor at 40%
18%
Increase in density factor at 100%
Increase in constructability factor at 40%
13%
Reduction in minimum parking lot requirements 100%
Grant to any buyer of 8.7 thousand US$/ apt
8%
Grant to any buyer with subsidy
Increase in constructability factor at 40%
Increase in density factor at 100% 31%
Reduction in minimum parking lot requirements 100%
Grant to any buyer of 8.7 thousand US$/ apt
Increase in constructability factor at 40% 34%
Increase in density factor at 100%
 Conclusions

Modelling with chained SC data can take many forms and allows to treat
very interesting and varied cases
The approach requires, as usual, to be very careful with data collection, but
also the design of the experiment - as a whole - tends to be more involved
The modelling stage can also turn to be quite complex, but if done with care
it can help illuminating decision-making in ways not allowed for by simpler
set ups.
I did not show any of the modelling intricacies here, but the following list of
references should provide some ammunition for those more interested in the
nitty gritty of things – as usual, we welcome ideas to improve on what we
have done.
 References
Bentham, J. (1789) An Introduction to the Principle of Morals and Legislations. Blackwell, Oxford.
Grisolía, J.M., López, F. and Ortúzar, J. de D. (2012) Sea Urchin: from plague to market opportunity.
Food Quality and Preference 25, 46-56.
Hicks, J.R. and Allen, R.G.D. (1934) A reconsideration of the theory of value. Economica 1, 52-76.
Hensher, D.A., Battellino, H.C. and Gee, J.L. (1997) The role of stated preferences and discrete choice
models in identifying community preferences for traffic management devices. In P.R. Stopher and M.E.
Lee-Gosselin (eds.), Understanding Travel Behaviour in an Era of Change. Pergamon Press, Oxford.
Kahneman, D. and Sugden, R. (2005) Experienced utility as a standard of policy design. Environmental
and Resource Economics 32, 161–181.
Lange, C., Issanchou, S. and Combris, P. (2000) Expected versus experienced quality: trade-off with
price. Food Quality and Preference 11, 289-297.
Palma, D.E., Ortúzar, J. de D., Rizzi, L.I. and Casaubon, G. (2018) Modelling wine choices: an integrated
framework for food purchase and consumption using advance choice modelling. Interdisciplinary
Choice Workshop, Universidad de Chile, 7-10 August 2018.
Robson, A. and Samuelson, L. (2011) The evolution of decision and experienced utilities. Theoretical
Economics 6, 311-339.
Train, K.E. and Wilson, W.W. (2008) Estimation on stated-preference experiments constructed from
revealed-preference choices. Transportation Research 42B, 191 – 203.
Waintrub, N., Greene, M. and Ortúzar, J. de D. (2016) Designing incentive packages for increased
density and social inclusion in the neighbourhood of mass transit stations. Habitat International 55,
133-147.