F. Bailey Norwood

Bio: F. Bailey Norwood is an academic researcher from Oklahoma State University–Stillwater. The author has contributed to research in topics: Willingness to pay & Valuation (finance). The author has an hindex of 22, co-authored 69 publications receiving 1996 citations. Previous affiliations of F. Bailey Norwood include Purdue University & North Carolina State University.

How Closely Do Hypothetical Surveys and Laboratory Experiments Predict Field Behavior

Abstract: We compare the ability of three preference elicitation methods (hypothetical choices, nonhypothetical choices, and nonhypothetical rankings) and three discrete-choice econometric models (the multinomial logit [MNL], the independent availability logit [IAL], and the random parameter logit [RPL]) to predict actual retail shopping behavior in three different product categories (ground beef, wheat flour, and dishwashing liquid). Overall, we find a high level of external validity. Our specific results suggest that the nonhypothetical elicitation approaches, especially the nonhypothetical ranking method, outperformed the hypothetical choice experiment in predicting retail sales. We also find that the RPL can have superior predictive performance, but that the MNL predicts equally well in some circumstances. experiment.

Effect of Experimental Design on Choice-Based Conjoint Valuation Estimates

Abstract: In this article, we investigate the effect of several commonly used experimental designs on willingness-to-pay in a Monte Carlo environment where true utility parameters are known. All experimental designs considered in this study generated unbiased valuation estimates. However, random designs or designs that explicitly incorporated attribute interactions generated more precise valuation estimates than main effects only designs. A key result of our analysis is that a large sample size can substitute for a poor experimental design. Overall, our results indicate that certain steps can be taken to achieve a manageably sized experimental design without sacrificing the credibility of welfare estimates.

Consumer Demand for a Ban on Antibiotic Drug Use in Pork Production

Abstract: Both bodies of the U.S. Congress have recently considered legislation to restrict use of antibiotics in livestock feed. Although several studies have addressed the costs of such restrictions, little is known about consumer demand. This study estimates consumers’ willingness to pay for pork produced without subtherapeutic antibiotics and consumers’ willingness to contribute to a reduction in antibiotic resistance by collecting data in a grocery store environment with mechanisms that involve the exchange of real food and real money. Results indicate that the welfare effects of a ban depend heavily on assumptions about consumers’ current knowledge about antibiotic use in pork production and the extent to which consumers are currently able to purchase antibiotic-free pork. Livestock feed and water are routinely supplemented with antimicrobial drugs. In the 1940s, animal scientists demonstrated that higher growth and feed conversion rates could be achieved by adding small amounts of antibiotics to feed and water and that the additional revenues more than offset antibiotic costs. Adding subtherapeutic doses (doses below 200 g per ton of feed) of antibiotics to feed quickly became a livestock industry standard, leading to lower production costs, adoption of confined production practices, and ultimately lower meat prices. The National Research Council (1999) estimates that approximately nineteen million pounds of antibiotics are used annually in the U.S. animal agriculture for all purposes including growth promotion and disease treatment. The U.S. General Accounting Office (2004), based on data from the Animal Health Institute, put the figure at thirteen million pounds of active ingredient in 2002. Although some antibiotics are given to livestock in response to disease, it is estimated that 80%‐90% are used solely for greater

An Inferred Valuation Method

Abstract: Although estimates of people's values for public goods are often needed to conduct cost-benefit analysis, existing value elicitation methods are prone to a number of well-documented biases. We argue that some of these biases result because people derive utility from the act of saying they are willing to pay for a good. To counteract this phenomenon, we consider an approach that asks people to predict or infer others' values for a good instead of asking people to state their own value. Both a conceptual model and results from a laboratory experiment lend support for the new approach.

Nudge: Improving Decisions about Health, Wealth, and Happiness

Abstract: NUDGE: IMPROVING DECISIONS ABOUT HEALTH, WEALTH, AND HAPPINESS by Richard H. Thaler and Cass R. Sunstein Penguin Books, 2009, 312 pp, ISBN 978-0-14-311526-7This book is best described formally as a general explanation of and advocacy for libertarian paternalism, a term coined by the authors in earlier publications. Informally, it is about how leaders, systems, organizations, and governments can nudge people to do the things the nudgers want and need done for the betterment of the nudgees, or of society. It is paternalism in the sense that "it is legitimate for choice architects to try to influence people's behavior in order to make their lives longer, healthier, and better", (p. 5) It is libertarian in that "people should be free to do what they like - and to opt out of undesirable arrangements if they want to do so", (p. 5) The built-in possibility of opting out or making a different choice preserves freedom of choice even though people's behavior has been influenced by the nature of the presentation of the information or by the structure of the decisionmaking system. I had never heard of libertarian paternalism before reading this book, and I now find it fascinating.Written for a general audience, this book contains mostly social and behavioral science theory and models, but there is considerable discussion of structure and process that has roots in mathematical and quantitative modeling. One of the main applications of this social system is economic choice in investing, selecting and purchasing products and services, systems of taxes, banking (mortgages, borrowing, savings), and retirement systems. Other quantitative social choice systems discussed include environmental effects, health care plans, gambling, and organ donations. Softer issues that are also subject to a nudge-based approach are marriage, education, eating, drinking, smoking, influence, spread of information, and politics. There is something in this book for everyone.The basis for this libertarian paternalism concept is in the social theory called "science of choice", the study of the design and implementation of influence systems on various kinds of people. The terms Econs and Humans, are used to refer to people with either considerable or little rational decision-making talent, respectively. The various libertarian paternalism concepts and systems presented are tested and compared in light of these two types of people. Two foundational issues that this book has in common with another book, Network of Echoes: Imitation, Innovation and Invisible Leaders, that was also reviewed for this issue of the Journal are that 1 ) there are two modes of thinking (or components of the brain) - an automatic (intuitive) process and a reflective (rational) process and 2) the need for conformity and the desire for imitation are powerful forces in human behavior. …

What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World

Abstract: A critical question facing experimental economists is whether behavior inside the laboratory is a good indicator of behavior outside the laboratory. To address that question, we build a model in which the choices that individuals make depend not just on financial implications, but also on the nature and extent of scrutiny by others, the particular context in which a decision is embedded, and the manner in which participants and tasks are selected. We present empirical evidence demonstrating the importance of these various factors. To the extent that lab and naturally occurring environments systematically differ on any of these dimensions, the results obtained inside and outside the lab need not correspond. Focusing on experiments designed to measure social preferences, we discuss the extent to which the existing laboratory results generalize to naturally-occurring markets. We summarize cases where the lab may understate the importance of social preferences as well as instances in which the lab might exaggerate their importance. We conclude by emphasizing the importance of interpreting laboratory and field data through the lens of theory.

Conducting discrete choice experiments to inform healthcare decision making: a user's guide.

Abstract: Discrete choice experiments (DCEs) are regularly used in health economics to elicit preferences for healthcare products and programmes. There is growing recognition that DCEs can provide more than information on preferences and, in particular, they have the potential to contribute more directly to outcome measurement for use in economic evaluation. Almost uniquely, DCEs could potentially contribute to outcome measurement for use in both cost-benefit and cost-utility analysis. Within this expanding remit, our intention is to provide a resource for current practitioners as well as those considering undertaking a DCE, using DCE results in a policy/commercial context, or reviewing a DCE. We present the fundamental principles and theory underlying DCEs. To aid in undertaking and assessing the quality of DCEs, we discuss the process of carrying out a choice study and have developed a checklist covering conceptualizing the choice process, selecting attributes and levels, experimental design, questionnaire design, pilot testing, sampling and sample size, data collection, coding of data, econometric analysis, validity, interpretation and welfare and policy analysis. In this fast-moving area, a number of issues remain on the research frontier. We therefore outline potentially fruitful areas for future research associated both with DCEs in general, and with health applications specifically, paying attention to how the results of DCEs can be used in economic evaluation. We also discuss emerging research trends. We conclude that if appropriately designed, implemented, analysed and interpreted, DCEs offer several advantages in the health sector, the most important of which is that they provide rich data sources for economic evaluation and decision making, allowing investigation of many types of questions, some of which otherwise would be intractable analytically. Thus, they offer viable alternatives and complements to existing methods of valuation and preference elicitation.

Discrete choice experiments in health economics: A review of the literature

Abstract: Discrete choice experiments (DCEs) have become a commonly used instrument in health economics. This paper updates a review of published papers between 1990 and 2000 for the years 2001-2008. Based on this previous review, and a number of other key review papers, focus is given to three issues: experimental design; estimation procedures; and validity of responses. Consideration is also given to how DCEs are applied and reported. We identified 114 DCEs, covering a wide range of policy questions. Applications took place in a broader range of health-care systems, and there has been a move to incorporating fewer attributes, more choices and interview-based surveys. There has also been a shift towards statistically more efficient designs and flexible econometric models. The reporting of monetary values continues to be popular, the use of utility scores has not gained popularity, and there has been an increasing use of odds ratios and probabilities. The latter are likely to be useful at the policy level to investigate take-up and acceptability of new interventions. Incorporation of interactions terms in the design and analysis of DCEs, explanations of risk, tests of external validity and incorporation of DCE results into a decision-making framework remain important areas for future research.

The Willingness to Pay-Willingness to Accept Gap, the "Endowment Effect," Subject Misconceptions, and Experimental Procedures for Eliciting Valuations

Abstract: The purpose of Plott and Zeiler (2005)—henceforth, PZ—was to investigate whether previously published experiments using consumption goods such as mugs and candy bars to measure gaps between willingness to pay (WTP) and willingnessto-accept (WTA) support endowment effect theory (EET). Our results demonstrate that the gap for commodities can be turned on and off by implementing procedures designed to control for subject misconceptions about the value elicitation procedures. Following experiments traditionally used to demonstrate the endowment effect, we used mug valuations to test EET. We used lottery rounds only to provide our subjects with paid practice using the value elicitation device prior to employing that device to elicit subjects’ mug valuations. In a footnote, we report evidence of contamination in the lottery data that rendered it inappropriate for our purposes (PZ 2005, fn. 15). Our footnote summarized the details of misconceptions reported in a data supplement provided to all who request our lottery data. The supplement was not referenced in our paper, so we make it available as an online Appendix to our Reply. 1 Andrea Isoni, Graham Loomes, and Robert Sugden (2011)—henceforth, ILS—use experimental procedures similar to ours and observe, just as we did, no gap in mug valuations. ILS claim that our 2005 paper is misleading and has misled researchers. They are concerned that our paper produces, and has been interpreted as producing, a set of procedures sufficient to remove all gaps, including gaps in lotteries. To justify their concern they focus on the wording of our abstract and overlook the context of paragraphs from which they quote sentences to support their thesis. The result is what we consider to be a misleading picture of the content of our paper and the facts that we report, namely that mug gaps disappear after we implement controls for misconceptions and that none of our data provides support for EET. We want to emphasize that our focus was on EET and not on more general theories of prefer ence formation, reference effects and decision processes that have emerged in the literature more recently and might explain our results. 2 In Section I, we demonstrate