Valuation under Fuzzy Preferences

Abstract

This paper reports the results of an experiment in which subjects with fuzzy induced values vote in a public goods referendum. The experiments demonstrate that if subjects’ preferences for a good are vague in the sense described by fuzzy numbers, their behavior in a referendum for a public good diverges significantly from what standard utility theory predicts when preferences are crisp. By exploiting the direct link between multiple bound uncertainty choice elicitation and fuzzy numbers we are subsequently able to incorporate this feature into the analysis of field willingness to pay data and demonstrate how information about the fuzziness of a respondent’s preferences obtained from payment card survey data can be incorporated into an interval data estimator of willingness to pay.

Keywords: Non-market valuation, fuzzy preferences, experimental economics

JEL Classification: C91, Q51