Economics

AnInvestigationintotheDemandforServiceContractsEvanC.MooreDissertationsubmittedtotheFacultyoftheVirginiaPolytechnicInstituteandStateUniversityinpartialfulfillmentoftherequirementsforthedegreeofDoctorofPhilosophyinEconomicsNancyLutz,Co-ChairCatherineEckel,Co-ChairArisSpanosAnyaMcGuirkRussellMurphyAugust13,2002Blacksburg,VirginiaKeywords:RiskAversion,Ambiguity,ExperimentalEconomicsAnInvestigationintotheDemandforServiceContractsbyEvanC.MooreNancyLutzandCatherineEckel,Co-ChairsEconomics(ABSTRACT)Thisdissertationisaninvestigationintothedeterminantsofdemandforservicecontractsonnewvehicles.Inthefirstchapter,Icharacterizetheconsumerdecisiontobuyaservicecontractwithadiscretechoicemodel.Hypothesesandconjecturesaretestedempiricallyusingsurveydatafromnewvehiclebuyers.Thesecondchapterconsistsofthedevelopmentandtestingofaninstrumentformeasuringattitudestowarduncertainty.Thistoolisusefulingaugingaversiontowardweakambiguity.Finally,inthethirdchapter,Iuseadditionalsurveyandexperimentaldatafromnewvehiclebuyerstofurtherdifferentiatebetweenthefactorsthatsignificantlyaffecttheservicecontractpurchasedecision.Avarietyofuncertaintymeasuresandtheirpredictivepowersarediscussed.IwouldliketothanktheJohnD.andCatherineT.MacArthurFoundation,NetworkonPreferencesandNorms,fortheirgenerousfinancialsupport,whichwasindispensabletothecompletionofthisresearch.AcknowledgementsIwanttothankNancyLutzandCatherineEckelfortheirguidanceandpatiencethroughoutmygraduatecareer.ThecommentsofNancyLutzonChaptersOneandThree,andtheworkofCatherineEckelonChapterTwo,wereparticularlyhelpful.Ithankthemembersofmycommittee,AnyaMcGuirk,RussellMurphy,andArisSpanos,fortheirremarksandsuggestions.MythanksalsogotoRobertGregory,whofirstintroducedmetoeconomictheory.Fortheirloveandsupport,Idedicatethisdissertationtomyparents.iiiTableofContentsListofTablesandCharts................................................................................................viPreface.............................................................................................................................viiiChapter1.InvestigatingtheDemandforServiceContracts.........................................11.Introduction........................................................................................................12.Literaturereview................................................................................................33.Adiscretechoicemodel.....................................................................................54.Hypothesesandconjectures...............................................................................95.Empiricalmodeling..........................................................................................176.Misspecificationtestingandthenotionofstatisticaladequacy.......................237.Conclusion.......................................................................................................29Chapter2.MeasuringAmbiguityAversion..................................................................301.Introduction......................................................................................................302.Aninstrumentformeasuringattitudestowardriskanduncertainty................313.Experimentaldesign.........................................................................................384.Procedureandsubjectrecruitment...................................................................395.Results..............................................................................................................406.Sexdifferences.................................................................................................527.Summaryanddiscussion..................................................................................59Chapter3.AttitudestowardUncertaintyandtheServiceContractPurchaseDecision............................................................611.Introduction......................................................................................................612.Backgroundandresearchdesign.....................................................................623.Arepresentativesub-sample............................................................................674.Additionalfactorsaffectingtheservicecontractpurchasedecision................715.Experimentresults...........................................................................................72iv6.Attitudestowarduncertaintyandtheservicecontractpurchasedecision.......797.Discussion........................................................................................................83Bibliography.....................................................................................................................84AppendixA.......................................................................................................................89AppendixB.......................................................................................................................96Appen