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Measuring Multidimensional Preferences in Non-consumer Choice: Results of a Conjoint
Analysis with Farmers
Christian D. Schade, Wei-Shiun Chang, Christine Lauritzen
The Institute for Entrepreneurial Studies and Innovation Management
Humboldt-Universität zu Berlin
Ravello (Italy): June 18 - 21, 2013
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Outline
• Introductiono Motivation
• Theoretical background
o Previous Literature
o Methodology
• Experiment Design
• Findingso Preferences of farmers
o Cluster analysis on farmers’
preferences
o Prediction of cluster
memberships
• Conclusion and Limitations
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Motivation
"It is not from the benevolence of the butcher, the brewer, or the baker
that we expect our dinner, but from their regard to their own interest.”
~ Adam Smith (1776) in The Wealth of
Nations
• Elicitation of farmers‘ preferences of farming as producers from two
general objectives ( the example of strawberry and cumcumber)o Short-term monetary self-regard aspect
o Long-term other regardings
• Explore preference heterogeneity among farmers
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Previous Literature
• Measuring individual preferenceso Behavioral economics: Güth, 1982; Bolton and Ockenfels,
2000; Kahneman et al, 1986; Rabin, 1993; Fehr and Schmidt,
1999
o Consumer research (marketing): Green & Rao, 1971; Green,
P. E., Srinivasan, 1978; 1990.
o Psychological and sociological literature: Austin et al.
1996; Beus and Dunlap, 1990; Petzelka et al., 1996; Maybery et
al, 2005
o Environmental research: Alriksson and Öberg, 2008;
Columbo et al., 2006; Maybery et al, 2005
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Methodology
• Conjoint analysis with rank orders (Green &Srinivasan, 1978;
Fishbein and Aizen, 1975)o Select important attributes with plausible levels
o Generate scenarios with a bundle of potential attributes (reduced set,
full profile)
o Each individual holds a set of utility weights for attribute levels, and the
individual assesses the overall utility for each scenario.
o Conjoint analysis then calculates the individuals’ part worth utilities of the
attributes from the preference ordering of stimuli.
Where represents the importance (part worth utility) of the attribute i, and represents the
desirability of level j of attribute i
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Overview of attributes and corresponding levels
• Net Income - €20,000 - €60,000
• Income Volatility - Income ~UU(NI-10% , NI+10%)- Income ~UU(NI-30% , NI+30%)
• Degree of external effects of the farm onto the ecosystem - low concern of the farmer- high concern of the farmer
• Maintaining the fertility of the land - low concern of the farmer- high concern of the farmer
16 (2 x 2 x 2 x 2) possibilities. We use 8 sets based on orthogonal design.
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8 Scenarios of farming situations to rank
1 being the most preferred, 8 the least
• A: I60,000, V10, EH, FL
• B: I20,000, V30, EH, FL
• C: I20,000, V10, EL, FL
• D: I20,000, V30, EL, FH
• E: I20,000, V10, EH, FH
• F: I60,000, V30, EH, FH
• G: I60,000, V30, EL, FL
• H: I60,000, V10, EL, FH
I: net income; V: volatility; E: negative externality; F: Fertility
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Experimental Design
Participants went through 4 steps in the experiment
• Holt and Laury Lottery ( to measure risk propensity)
• Description of Attributes leading to different agricultural
situations
• Subjects were asked to rank 8 different screnarios
• Questionnaire: (demographics, training/ experinecne for
farming, farming history in family (students), farming
related questions for farmers (farm size, years of
possesssing, etc.)
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Data
• 14 Students recruited from HU Agricultural Department, Sessions run in
Humboldt Decision Sciences Laboratory (HUDSciLab),
November 2012
• 19 Farmers from Uelzen, Germany, Session run with 20-station mobile lab
in Uelzen, December 2012
• 35 Students from Georg August Universität, sessions run with
mobile lab in Göttingen, January 2013
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General statistics of participants
Student Farmer Pooled
Age 24.06 (3.886) 30.68 (7.853) 25.91 (6.029)
Female ratio 0.286 0.156 0.250
Parents in farming 0.592 (0.497)
Farming as career 0.939 (0.242)
Organic-favored 0.305
Farm ownership ratio 0.842
Years of possession (farm) 5.684 (7.111)
# of employee 4.579 (2.341)
Farm size (hectares) 272.6 (220.0)
Risk aversion (turning
point)
6.182 (1.646)a 6.000 (1.732) 6.140 (1.652)
# of obs 49 19 68
Parentheses are standard deviation. a: sample size=44 for students, 13 for farmers, 57 for
pooled
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Average ranking of situation
Situation Description Ave. ranking Std. dev.
A I60,000, V10, EH, FL3.176 (1.050)
B I20,000, V30, EH, FL6.750 (1.164)
C I20,000, V10, EL, FL7.265 (0.971)
D I20,000, V30, EL, FH5.750 (1.250)
E I20,000, V10, EH, FH1.676 (1.112)
F I60,000, V30, EH, FH4.117 (1.399)
G I60,000, V30, EL, FL5.162 (1.532)
H I60,000, V10, EL, FH2.103 (1.161)
I: net income; V: volatility; E: negative externality; F: Fertility
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Data analyses
• Conjoint analysis to analyze relative importance of attributes
• Cluster analysis to analyze preference heterogeneity among
farmers
• Probit regressions to predict cluster memberships
Y o Dependent variables
• Cluster 1 vs other clusters (Y=1 if cluster 1, otherwise =0)• Cluster 2 vs other clusters (Y=1 if cluster 2, otherwise =0)• Cluster 3 vs other clusters (Y=1 if cluster 3, otherwise =0)
o Independent variables • For students: age, gender, risk propensity, career plan (to be a
farmer), parents in agri-business, farm type inclination (organic vs conventional farm)
• For farmers: age, gender, risk propensity, ownership, years of possession, # of employee in farm, farm size
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Findings 1 (conjoint analysis): Fertility is most important factor, followed by volatility, income and externality.
Part-worth utilities for all subjects
Attribute Ave. relative importance (%) Levels Utility
(part-worth)
Students (49) Farmers (19) Pooled
Income 26.292 22.563 25.25060000E .860
20000E -.860
Volatility 27.670 26.814 27.43130% -.945
10% .945
Externality 16.616 16.275 16.520Low -.570
High .570
Fertility 29.422 34.348 30.798Low -1.088
High 1.088
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Finding 2 (Custer analysis): 3 clusters are identified; cluster 1 weighs heavily on externality, cluster 2 focuses on financial incentives, cluster 3 on fertility.
Cluster ANOVA
1 2 3 F Sig.
Income 12.50 32.05 13.96 65.929 .000
Volatility 18.75 32.79 18.01 23.519 .000
Externality 44.35 11.07 18.72 48.349 .000
Fertility 24.40 24.08 49.32 61.797 .000
# of farmers (% of
farmers)
1 (5.3%) 12
(63.2%)
6 (31.6%)
# of Agri Students (% of
st)
6
(12.2%)
31
(63.3%)
12 (24.5%)
Farmer ratio in cluster 14.3% 27.9% 33.3%
*: parentheses are numbers for student and farmer respectively.
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Finding 3 (probit regression):
Only farm type inclination is significant to predict cluster
membership in cluster 1 for students (Coefficients are 1.38
and 1.35 with P values of 0.022 and 0.029 in the models
without or with risk propensity respectively).
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Conclusion
• Preserving fertility of the land is the most important element among
the four attributes we considered critical to farming decisions,
followed by risk, income, and externality.
• There is heterogeneity across farmers; three clusters are identified.
The majority of farmers are classified into the financially driven
cluster; however, externality and fertility are also quite important to
this cluster. Some farmers fall in to groups with large responsibility
toward environmental externality and fertility
• Classification of various preferences is not easily detected; though
agricultural students with high concern for environmental externality
would prefer to work in organic farming.
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Limitations
• The findings are exclusively associated with German
farming preferences for two reasons:o We ran the experiment with German farmers/agri students, the
preferences on financial incentives and environmental concerns
are subject to this specific role and region.
o The findings are exclusively associated with the specific
parameters (levels) of attributes to reflect German agricultural
business.