Today at Green School, I gave a talk about why I am working on climate change and clean energy. I made a comparison between a 200 euro cookstove that is perfectly clean but costs more than an Ethiopian's monthly income and a wood-burning stove that costs less than a tenth of that but produces some smoke. A Green School teacher was talking about the trade-offs. There is a trade-off between a perfect but expensive stove and a cheap but not perfect stove. I wrote this issue in the book and an excerpt of which can be found below.
Wish-list approach vs. trade-off approach (p41)
Although research on the relative strengths of attributes affecting stove choice was lacking, a few studies have attempted to estimate the relative strengths of attributes (Gupta and Köhlin, 2006; Pohekar, Kumar, and Ramachandran, 2005). However, their adopted methodology is questionable; for example, the strengths of the attributes were estimated by asking respondents to rank/rate different product-specific attributes as the basis of their preference levels. Such an approach has the risk of people listing every positive attribute–such as safety, convenience of use and cleanliness–as highly preferred, while negative attributes–such as smoke, price and operating cost–are listed as least preferred. If there is a failure to check such biases, this results in the generation of a potentially unrealistic ‘wish list’ at the individual level, with the extrapolation of such data for a given population through aggregation resulting in a ‘democratically expressed wish list’. Choices are therefore assessed in terms of a hypothetical collection of attributes, rather than analysing the trade-offs among choices available to consumers. Pohekar and Ramachandran’s (2005) results showed such a tendency. Their study revealed that Liquid Petroleum Gas (LPG) for cooking is the most preferred alternative, while the study region in India is known for its use of biomass fuels and very little use of LPG.
In the ranking- and rating-based studies, respondents are not required to express preference in terms of trade-offs between the attributes. In choice experiments, the adopted methodology for this research, the strength lies in its ability to capture preference in terms of a trade-off between the attributes, which in turn can be used for the estimation of demand, price elasticity, income elasticity, the value of each attribute and trade-offs between them. Theoretically most product attributes will affect choices if the levels of the product attributes are raised or lowered beyond the trade-off range of an individual or group. For example, the result of this study indicates that the stove price is not significant to the high-income group, perhaps because the study tested a maximum stove price of 40 USD (i.e., 500 ETB). However, for the same income group, if the stove price is raised continuously, at some point the price will become higher than the highest willingness-to-pay price of the group (e.g., if a price is higher than income and savings, one cannot pay the price); hence, it would affect the choices made. Thus, it is important to design a product to meet consumer needs based on the trade-offs amongst attributes.