Operationalising Equivalent Consumption through Stated Preferences: A Pilot Study in Two Parts

Ignacio Abasolo, Clara Sandelind, Erik Schokkaert, Katherine Stevens, Aki Tsuchiya

Abstract

Equivalent consumption (also known as equivalent income) is a preference-based, cardinal, and interpersonally comparable measure of individual wellbeing. This paper reports on a pair of exploratory studies that aimed to estimate the parameters of an individual utility function, to operationalise equivalent consumption. First, a discrete choice experiment was designed to model individual preferences, and pilot data were collected from a convenience sample on-line (n=52). Second, the same survey was conducted in face-to-face interviews with a second sample to qualitatively analyse the way people attempt the survey. The results suggest that, while the choice experiment data can be modelled by pooling across respondents, it is difficult to estimate individual-level models. Furthermore, the qualitative data suggest that respondents struggle to interpret some of the elements of the choice task. The pilot study makes clear the central challenges in taking into account preference heterogeneity when trying to operationalise the concept of equivalent consumption as a measure of individual wellbeing through stated preferences.