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Min Ding, Rajdeep Grewal, John Liechty

Cited by*: 49 Downloads*: 25

Because most conjoint studies are conducted in hypothetical situations with no consumption consequences for the participants, the extent to which the studies are able to uncover "true" consumer preference structures is questionable. Experimental economics literature, with its emphasis on incentive alignment and hypothetical bias, suggests that more realistic incentive aligned studies will result in stronger out-of-sample predictive performance of actual purchase behaviors and provide better estimates of consumer preference structures than hypothetical studies. To test this hypothesis, the authors design an experiment with conventional (hypothetical) conditions and their parallel incentive-aligned counterparts. Using Chinese dinner specials as the context, the authors conducted a field experiment in a Chinese restaurant during dinnertime. The results provide strong evidence in favor of incentive-aligned choice conjoint analysis, in that incentive-aligned choice conjoint outperforms hypothetical choice conjoint in out-of-sample predictions (59% versus 26% for incentive-aligned choice conjoint and hypothetical choice conjoint, respectively for the top two choices). As expected, subjects in the incentive-aligned choice condition exhibit preference structures that are systematically different from the preference structures of subjects in the hypothetical condition. Most notably, the subjects in the incentive-aligned choice condition are more price sensitive and exhibit different heterogeneity patterns. To determine the robustness of these results, the authors conducted a second study that used snacks as the context and only considered the choice treatments. This study confirmed the results by again providing strong evidence in favor of incentive-aligned choice analysis in out-of-sample predictions (36% versus 16% for incentive-aligned choice conjoint and hypothetical choice conjoint, respectively for the top two choices). The results provide a strong motivation for conjoint practitioners to consider conducting their studies in realistic settings using incentive structures that require participants to live with their decisions.

Kuan-Ming Chen, Min Ding, John A List, Magne Mogstad

Cited by*: None Downloads*: None

Recent changes in labor arrangements have increased interest in estimating and understanding the value of job flexibility. We leverage a large natural field experiment at Uber to create exogenous variation in expected market wages across individuals and over time. Combining this experiment with high frequency panel data on wages and individual work decisions, we document how labor supply responds to exogenous changes in expected market wages in a setting with virtually no restrictions on drive labor allocation. We find that there is i) systematic heterogeneity in labor supply responses both across drivers and within a driver over time, ii) significant fixed costs of beginning a shift, and iii) high rider demand when it is costly for drivers to work. These three findings motivate a model of labor supply with heterogeneous preferences over work schedules, adjustment costs, and statistical dependence between market wages and the costs of driving. We recover the labor supply elasticities and reservation wages of this dynamic labor supply model via a combination of experimental estimates and other data moments. We then perform counterfactual analyses that allow us to examine how preference heterogeneity and adjustment costs influence the responses of workers' to wage incentives as well as infer drivers' willingness to pay for the ability to customize and adjust their work schedule. We also show that a static approach to the driver's dynamic problem delivers materially different estimates of workers' labor supply elasticities and their value of job flexibility.