Essays in modeling individual preferences

Armenak Markosyan

doi:10.7273/000005949

This dissertation includes three essays modeling the effect of information on individual preferences. The first article develops a theoretical model to consider the tradeoff between enhanced quality and perceived risk associated with consumption of new technology foods. Although consumers in general have positive feelings towards functional foods, many are still not willing to purchase them even with a significant discount. In this paper, I model the choice of functional foods in a utility theoretic framework to study the effect of different types of information on demand for such foods by consumers with heterogeneous perceived risk and quality preferences. The second study is an empirical analysis of consumers' response to new technology with a product-enhancing attribute. This article measures consumers' responses to apples enriched with an antioxidant coating. Antioxidant-enriched apples are believed to provide additional health benefits reducing the risk of cancer and heart diseases. Consumer surveys with contingent valuation questions were conducted in Seattle and Spokane, Washington in 2006. A key result is that organic consumers are less likely to buy apples with this new technology than consumers in Seattle. Information regarding the potential health benefits of antioxidants has a positive significant effect on consumers' willingness to pay. The estimated mean willingness to pay suggests that there is a small premium associated with this product in the mind of an average consumer. The third article is a political economy study which analyzes determinants of individual preferences for trade policies. This article analyzes individual preferences for trade policy instruments by constituents of special interest groups and provides new determinants of those preferences. The results suggest that individuals with high levels of human and physical capital are more likely to support free-trade policies and oppose trade-restricting ones. The choice of specific free-trade of trade-restricting policies depends on sector of production. In addition, we suggest that individuals with close ties with government are likely to supporting government in choosing the policy instruments regardless of the other factors. Finally, individuals who rely on mass media for trade-related information tend to shift their preferences towards protectionist policies.

Essays in modeling individual preferences

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