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Bounding WTP distributions to reflect the ‘actual’ consideration set

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  • Campbell, Danny
  • Hensher, David A.
  • Scarpa, Riccardo

Abstract

In this paper we extend the independent availability logit and combined latent class mixed logit models to accommodate respondents with different consideration sets due to their cost thresholds and cut-offs. Pertinent features of our model are that it is estimated in WTP-space and that the class-specific WTP distributions are truncated to be within the bounds deduced from the cost level(s) within each class-specific consideration set. Our analysis shows that our approach is well suited at uncovering the heterogeneity in the cost thresholds and cut-offs used by respondents. This is shown to help build a richer insight into respondent׳s behaviour as well as raise a number of concerns about the appropriateness of assuming deterministic choice sets. We discuss the implications of our results for welfare analysis.

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  • Campbell, Danny & Hensher, David A. & Scarpa, Riccardo, 2014. "Bounding WTP distributions to reflect the ‘actual’ consideration set," Journal of choice modelling, Elsevier, vol. 11(C), pages 4-15.
    • Handle: RePEc:eee:eejocm:v:11:y:2014:i:c:p:4-15
    DOI: 10.1016/j.jocm.2014.02.004
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    12. Edel Doherty & Danny Campbell & Stephen Hynes, 2013. "Models of Site-choice for Walks in Rural Ireland: Exploring Cost Heterogeneity," Journal of Agricultural Economics, Wiley Blackwell, vol. 64(2), pages 446-466, June.
    13. Wuyang Hu & Marvin T. Batte & Timothy Woods & Stan Ernst, 2012. "Consumer preferences for local production and other value-added label claims for a processed food product," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 39(3), pages 489-510, July.
    14. Danny Campbell & Edel Doherty, 2013. "Combining discrete and continuous mixing distributions to identify niche markets for food," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 40(2), pages 287-312, March.
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    9. Edenbrandt, Anna Kristina & Lagerkvist, Carl-Johan & Lüken, Malte & Orquin, Jacob L., 2022. "Seen but not considered? Awareness and consideration in choice analysis," Journal of choice modelling, Elsevier, vol. 45(C).
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    13. D. Fang & R. M. Nayga & H. A. Snell & G. H. West & C. Bazzani, 2019. "Evaluating USA’s New Nutrition and Supplement Facts Label: Evidence from a Non-hypothetical Choice Experiment," Journal of Consumer Policy, Springer, vol. 42(4), pages 545-562, December.
    14. Marije Schaafsma & Roy Brouwer, 2020. "Substitution Effects in Spatial Discrete Choice Experiments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(2), pages 323-349, February.
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    16. Balbontin, Camila & Hensher, David A. & Collins, Andrew T., 2019. "How to better represent preferences in choice models: The contributions to preference heterogeneity attributable to the presence of process heterogeneity," Transportation Research Part B: Methodological, Elsevier, vol. 122(C), pages 218-248.
    17. Erdem, Seda & Campbell, Danny & Thompson, Carl, 2014. "Elimination and selection by aspects in health choice experiments: Prioritising health service innovations," Journal of Health Economics, Elsevier, vol. 38(C), pages 10-22.
    18. Daniel, Aemiro Melkamu, 2020. "Towards Sustainable Energy Consumption Electricity Demand Flexibility and Household Fuel Choice," Umeå Economic Studies 971, Umeå University, Department of Economics.
    19. Erdem, Seda & Campbell, Danny & Thompson, Carl, 2014. "Addressing elimination and selection by aspects decision rules in discrete choice experiments: does it matter?," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169839, Agricultural and Applied Economics Association.
    20. Contu, Davide & Strazzera, Elisabetta, 2022. "Testing for saliency-led choice behavior in discrete choice modeling: An application in the context of preferences towards nuclear energy in Italy," Journal of choice modelling, Elsevier, vol. 44(C).
    21. Börger, Tobias & Ngoc, Quach Thi Khanh & Kuhfuss, Laure & Hien, Tang Thi & Hanley, Nick & Campbell, Danny, 2021. "Preferences for coastal and marine conservation in Vietnam: Accounting for differences in individual choice set formation," Ecological Economics, Elsevier, vol. 180(C).
    22. Campbell, Danny & Boeri, Marco & Doherty, Edel & George Hutchinson, W., 2015. "Learning, fatigue and preference formation in discrete choice experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 345-363.
    23. Gustafson, Christopher R., 2023. "Comparing the impact of subsidies and health prompts on choice process variables and food choice: The case of dietary fiber," OSF Preprints u4v5c, Center for Open Science.

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