The Choice Modelling and Valuation Group has made major innovations and extensions to best practice in the area of discrete choice modelling, as a means by which to understand and predict choice behaviour.
Where appropriate we develop models using information from choices that people are observed to make, referred to as revealed preference (RP) information. In cases where there are limitations in the information provided by observed choices, for example when predicting demand for a new product or service, we collect stated preference choice information (SP data).
A number of procedures for eliciting stated responses exist, but current practice focuses on the use of discrete choice experiments (DCE), which involve the presentation of hypothetical choice situations to respondents in surveys. In SP DCE each alternative is described by its relevant attributes, for example, the quality of the service, the cost of the service, future characteristics, etc. Each of the attributes in the experiment is also described by a number of levels, e.g. low cost versus high cost. The attribute levels are combined using principles of experimental design to define different packages of goods or services which individuals then compare in surveys.
The outputs from discrete choice models can be used to improve understanding of the drivers of people’s choices, including:
- estimates of the relative importance of different attributes for a specific product or service, for different population groups
- estimates of the trade-offs or marginal rates of substitution that people are willing to make between attributes, providing indirect measurements of willingness to pay.
The outputs from discrete choice models can also be used to develop predictive models to gain insight into how people's choices may change under differing circumstances. Using these models is particularly useful for policymakers to demonstrate the likely impacts of a policy. The models can provide estimates of changes in demand for services, as well as insight into how a policy may impact different groups within society. The models can also quantify how individual attributes influence demand, thereby providing estimates of elasticities, as well as providing estimates of consumer surplus, i.e. monetary valuation of the benefits obtained from different services.
An important benefit of the rigorous statistical procedures we employ is that information can be given on the accuracy of all the outputs of the model, as well as indicating whether specific aspects of the choice are truly significant in influencing behaviour.
RAND Europe was one of the first companies to employ SP DCE in the transport sector and continues to conduct research to improve SP methods. RAND Europe pioneered procedures to combine RP and SP data to exploit the strengths of each of the data types to best advantage. We also offer expertise in RP and SP survey design, based on insights gathered from our extensive practice in RP and SP modelling.
Chronic obstructive pulmonary disease (COPD) accounts for one death every 20 minutes in England and Wales. RAND Europe and the University of Cambridge are conducting a study on "Living with Breathlessness" to improve the end-of-life care strategy for patients with advanced COPD: one which is based on a recognition of the slow relentless progression of non-malignant disease, its effect on patients and care-givers, and their stated care preferences.
When treating patients for Hepatitis-C, physicians may be influenced by many factors: their prior experience, the health and social care systems more broadly, or clinical, social and behavioural, or demographic factors. To better understand this decision-making process, GlaxoSmithKline commissioned RAND Europe to investigate the comparative influence and importance of specific factors and combinations of factors and their trade-offs.
Security technologies and related measures are implemented to mitigate likely risks from terrorist attacks and other threats, but these technologies and measures may compete with privacy and civil liberties. RAND Europe is participating in PACT, a 3-year EU-funded research project to assess existing knowledge about the relation between security and privacy; collect empirical evidence through a pan-European survey; and analyze the main factors that affect how the public perceives the security and privacy implications of security technology.
Understanding the Impact of Differential University Fees in England
Starting in 2012, students at English universities will face tuition fees of up to £9,000 per year. Concerns arise about participation levels in higher education, particularly from disadvantaged groups. RAND Europe is seeking to identify the factors that determine choices about higher education and to test how potential students might respond to the increased fees, to help policy makers and education providers plan for the new environment.
Multi-buy promotions have a large impact on which alcohol products consumers purchase, according to stated-preference research by RAND Europe for Her Majesty's Revenue and Customs. The overall impact on all alcohol purchasing is somewhat smaller, though still substantial: Moderate drinkers are more likely to be swayed by these promotions, but because hazardous and harmful drinkers purchase much higher volumes of alcohol, the absolute impact on these groups is higher.
When it comes to European postal services, it is clear that different market segments have different needs. RAND Europe, in conjunction with Accent and Swiss Economics, undertook a study for the European Commission to help identify consumer needs in relation to postal services. Among the conclusions: big business valued letter services more than did small and medium enterprises or the public, whereas all consumers valued parcel services as well as high levels of reliability and low levels of loss. The research was conducted using stated preference experiments in three countries.
The UK Department for Energy and Climate Change (DECC) was interested in understanding the effectiveness of interventions designed to change energy use behaviour in the home. They commissioned RAND Europe to assess the state of knowledge about “what works”, by systematically reviewing previous trials and initiatives, drawing on evidence from the UK and abroad. This review has informed DECC’s November 2012 Energy Efficiency Strategy, which sets out their policy direction for decades to come.
Growing interest in the use of models that recognise the role of individuals' attitudes and perceptions in choice behaviour has influenced a team of RAND Europe researchers to examine the latent nature of attitudes. In an article in Transportation
they present an application of jointly estimated attitudinal and choice models to a real-world transport study, looking at the role of latent attitudes in a rail travel context. The result of their work is an ordered logit structure that explains how the choices people make may be strongly influenced by their attitudes, but that the choices also say something about those attitudes.
The policy of offering patients a choice in where they receive hospital treatment was intended to create competition among providers and to improve quality of care, but it has not succeeded. Patients say they value aspects of quality when choosing a hospital, but few actually consult published performance information and instead opt to be treated by their local provider. Moreover, the 'threat' of patient choice has led few hospitals to try to improve their reputation.
To combat climate change, the British government has thus far valued the cost of carbon emissions based on how much people should
pay, rather than how much they are willing
to pay, or the value they place on carbon emissions reduction. An analysis of a series of RAND Europe studies suggests there is an opportunity for a large consumer surplus — a social benefit — by introducing a carbon tax to pay for the damages caused by carbon emissions.
Social care is an increasing important public service, but little is known about its impact and how effective or efficient different care interventions are. To help remedy this situation, RAND Europe has undertaken research for the Office of National Statistics and the Personal Social Services Research Unit that quantifies the value placed on different aspects of social care related quality of life. This research forms part of the new Adult Social Care Outcomes Toolkit (ASCOT), which provides a tool for commissioners, service providers and regulators to quantify the outcomes of care interventions and help prioritise expenditure in areas which offer the greatest return to service users.
Competition authorities and regulators often need to understand how customers will respond to price changes, whether they will switch providers if there are changes in the market, and the value that they put on alternatives and their attributes. The UK Competition Commission commissioned RAND Europe to review the methodological options available for carrying out stated preference studies to answer such questions and to advise on the design of and market research methods to conduct such studies.
To understand the privacy, liberty, and security trade-offs individuals are willing to make, and so policy makers can be better informed about citizens' true preferences in this domain, RAND Europe undertook an innovative stated-preference discrete-choice modelling study. The research included three real-life case studies where these factors come into play: applying for a passport, traveling on the national rail network, and attending a major public event such as the opening ceremony of the Olympics.
Britain's gas and electricity regulator, Ofgem, undertakes price reviews every five years to set a price control regime for regional operators. For the last review, Ofgem commissioned a national research programme to identify and quantify customers' priorities for electricity distribution improvements. RAND Europe's effort focused on the design and analysis of stated preference choice experiments to measure customers' willingness to pay or to be compensated for electricity service changes.