International Choice Modelling Conference, International Choice Modelling Conference 2015

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Stated Preference Modelling of Intra-Household Decisions: Can You Approximate the Bargaining Space?
Matthew John Beck, John Mathew Rose

Last modified: 18 May 2015

Abstract


Stated preference analysis is a widely used technique across many disciplines of study, where the outputs of the research are used to define policy in areas as diverse as health care, transportation, infrastructure investment, marketing and environment. The majority of studies conducted sample one decision maker and ask them to make a series of choices in isolation. However, many decisions are not made by such an isolated decision maker; where to live, what car to buy, what holiday to take; what medical option to select are but a few examples of where multiple individuals are affected by the outcome of the choice and, via a process of negotiation, need to align preferences so that a consensus choice can be made.

 

The nature of intra-household bargaining has long been recognised within the marketing literature; for example Coulson (1966) states that other members of the family exert considerable influence on the housewife in making brand decisions. Furthermore, Wind (1976) emphasises that having identified members of the buying unit, one would ideally like to examine the dynamics of the purchase and consumption decision processes among all the relevant members of the unit. Corfman and Lehmann (1987) investigate the process of conflict resolution in household purchase decisions. Dellaert et al. (1998) use a two stage conjoint method that provides a framework over which influence can be measured. Arora and Allenby (1999) use a similar model to examine the household choice of lawn mowers (a “male” choice) and ovens (a female choice). Aribarg et al. (2002) investigate the choice between teenagers and their parents over two case studies; computers and snack foods.

 

Perhaps in response to the calls by noted econometricians to better understand the nature of the interdependent decision making process (Manski, 2000; McFadden 2001a,b), or a growing cross-disciplinary understanding that household choices represent an important dimension of choice behaviour, the study of group choices has become an emergent theme in the wider stated preference literature. Examples of research include, but are not limited to, residential choice (Molin et al. 2003; Zhang and Fujiwara 2009; Inoa et al. 2013), travel mode choice (Wen and Koppelman 2000), activity behaviour (Scott and Kanaroglou 2002; Srinivasan and Bhat 2005), holiday destination choice (Dosman and Adamowicz 2006; Beharry-Borg et al. 2009), employment choices (O’Neill and Hess 2013) and tap water choice (Rungie et al. 2014).

 

The typical data collection methodology for stated preference studies of household choice follows a two stage process. Firstly individual preferences are collected from each dyadic respondent. Secondly, the dyad is brought together and a group choice is made. Differences between the originally expressed choices of the individuals in the first stage and the final choice made by the group in the second stage represent that changes that have been negotiated by the individual members such that a consensus decision can be reached. However, this process treats the individual preferences as an exogenous variable in the group choice process. An alternative process that treats the preferences of individuals as an endogenous to the group is the interactive agency choice experiment introduced by Brewer and Hensher (2000) to study employment choices refined by Rose and Hensher (2004) and applied in the context of automobile purchasing by Hensher et al. (2009). This approach focuses on sequential or simultaneous choice tasks that are played by the agents involved in a group decision, which are subsequently followed by varying rounds of feedback, review and revision of each agents initial preferences with the analyst (and participants if desired) can examine the shifting choices of agents in response to the bargaining process.

 

In the vast majority of studies that examine group choice, the evidence clearly indicates that the preferences of groups differ from the preferences of individuals, and that individuals are often poor predictors of group choice. Consequently, if the analyst is interested in examining a choice behaviour that is inherently group based, group responses should collected. While the two stage model and the interactive agency choice experiment differ in how the choices of individuals are used within the stated choice experiment, one commonality among all studies of intra-household decisions is the significant cost imposition with respect to the number of respondents required, coordination of the dyadic agents and the time required to collect and collate the responses; as well as above average time costs to the typical respondent. These significant burdens on both the respondents and time and cost budgets of the researcher present a barrier to the wider spread adoption of these methods. However, the vast majority

 

An alternative approach developed by Puckett (2006) and also described by Hensher and Puckett (2008), termed minimum information group inference, is designed to overcome these barriers by approximating the bargaining space rather than mapping it in detail. The process requires participants to rank their preferences and also identify the choices they would or would not consider should their first choice not be available to them. This information can be used to identify the initial preferences of each agent and to what they would be prepared to move should they concede fully to the other agent. These concession models allow for the theoretical estimation of the boundaries of the behavioural space over which each individual in the group is prepared to negotiate. 

 

To date, while the two stage approach, interactive agency choice experiment and minimum information group inference have been used within the literature examining the decisions made by multiple respondents, it has not been established if the minimum information approach can be retrieve the bargaining space in which the group choice would lie. Thus, the objectives of this paper are to establish if the preferences of groups differ to those of individuals and to assess the ability of the MIGI to provide the researcher with an alternative method of approximating the group outcome should the cost and time requirements of a comprehensive group choice experiment be infeasible.

 

References

 

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Brewer, A.M. and Hensher, D.A. (2000). “Distributed Work and Travel Behaviour: The Dynamics of Interactive Agency Choices Between Employers and Employees.” Transportation 27: 117-148.

 

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