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Cost thresholds, cut-offs and sensitivities in stated choice analysis: Identification and implications

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

Abstract

Within the discrete choice literature, there is growing recognition that some respondents do not process all attributes when evaluating their choice outcomes. Worryingly, the cost attribute is often among those attributes that are likely to be ignored by respondents. We use probabilistic decision process models (similar in form to latent class models, but where we define the classes to describe specific heuristics) to facilitate situations where respondents adopt cost thresholds and cut-offs. We further develop this model to address the potential confounding between preference heterogeneity and processing heterogeneity by simultaneously allowing for a segmentation of respondents based on their sensitivities to cost. Results, based on an empirical dataset on the existence value of rare fish species in Ireland, provide further confirmation that a share of respondents did not attended to cost. Importantly, however, when heterogeneity to cost levels is accounted for the inferred incidence of complete non-attendance is markedly lower, to the extent that when cost thresholds and cut-offs are also accommodated it almost disappears. This modelling approach leads to significant gains in model fit and has important implications for welfare analysis.

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Bibliographic Info

Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 34 (2012)
Issue (Month): 3 ()
Pages: 396-411

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Handle: RePEc:eee:resene:v:34:y:2012:i:3:p:396-411

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Web page: http://www.elsevier.com/locate/inca/505569

Related research

Keywords: Discrete choice experiments; Willingness to pay; Attribute non-attendance;

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References

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  1. David Hensher & John Rose & William Greene, 2005. "The implications on willingness to pay of respondents ignoring specific attributes," Transportation, Springer, Springer, vol. 32(3), pages 203-222, 05.
  2. Hess, Stephane & Hensher, David A., 2010. "Using conditioning on observed choices to retrieve individual-specific attribute processing strategies," Transportation Research Part B: Methodological, Elsevier, vol. 44(6), pages 781-790, July.
  3. Hanley, Nick & Adamowicz, Wiktor & Wright, Robert E., 2005. "Price vector effects in choice experiments: an empirical test," Resource and Energy Economics, Elsevier, Elsevier, vol. 27(3), pages 227-234, October.
  4. David Hensher & William Greene, 2010. "Non-attendance and dual processing of common-metric attributes in choice analysis: a latent class specification," Empirical Economics, Springer, Springer, vol. 39(2), pages 413-426, October.
  5. Fredrik Carlsson & Mitesh Kataria & Elina Lampi, 2010. "Dealing with Ignored Attributes in Choice Experiments on Valuation of Sweden’s Environmental Quality Objectives," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 47(1), pages 65-89, September.
  6. Fredrik Carlsson & Peter Martinsson, 2008. "How Much is Too Much?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 40(2), pages 165-176, June.
  7. Danny Campbell & W. Hutchinson & Riccardo Scarpa, 2008. "Incorporating Discontinuous Preferences into the Analysis of Discrete Choice Experiments," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 41(3), pages 401-417, November.
  8. Riccardo Scarpa & Mara Thiene & David A. Hensher, 2010. "Monitoring Choice Task Attribute Attendance in Nonmarket Valuation of Multiple Park Management Services: Does It Matter?," Land Economics, University of Wisconsin Press, vol. 86(4), pages 817-839.
  9. Puckett, Sean M. & Hensher, David A., 2008. "The role of attribute processing strategies in estimating the preferences of road freight stakeholders," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 44(3), pages 379-395, May.
  10. Mika Rekola, 2003. "Lexicographic Preferences in Contingent Valuation: A Theoretical Framework with Illustrations," Land Economics, University of Wisconsin Press, vol. 79(2), pages 277-291.
  11. Morten Mørkbak & Tove Christensen & Dorte Gyrd-Hansen, 2010. "Choke Price Bias in Choice Experiments," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 45(4), pages 537-551, April.
  12. William H. Greene & David A. Hensher, 2013. "Revealing additional dimensions of preference heterogeneity in a latent class mixed multinomial logit model," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 45(14), pages 1897-1902, May.
  13. Swait, Joffre, 2001. "A non-compensatory choice model incorporating attribute cutoffs," Transportation Research Part B: Methodological, Elsevier, vol. 35(10), pages 903-928, November.
  14. Saelensminde, Kjartan, 2006. "Causes and consequences of lexicographic choices in stated choice studies," Ecological Economics, Elsevier, vol. 59(3), pages 331-340, September.
  15. Cantillo, Víctor & Heydecker, Benjamin & de Dios Ortúzar, Juan, 2006. "A discrete choice model incorporating thresholds for perception in attribute values," Transportation Research Part B: Methodological, Elsevier, vol. 40(9), pages 807-825, November.
  16. DeShazo, J. R. & Fermo, German, 2002. "Designing Choice Sets for Stated Preference Methods: The Effects of Complexity on Choice Consistency," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 123-143, July.
  17. David Hensher & John Rose & William Greene, 2012. "Inferring attribute non-attendance from stated choice data: implications for willingness to pay estimates and a warning for stated choice experiment design," Transportation, Springer, Springer, vol. 39(2), pages 235-245, March.
  18. Danny Campbell & David A. Hensher & Riccardo Scarpa, 2011. "Non-attendance to attributes in environmental choice analysis: a latent class specification," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 54(8), pages 1061-1076, December.
  19. Riccardo Scarpa & Timothy J. Gilbride & Danny Campbell & David A. Hensher, 2009. "Modelling attribute non-attendance in choice experiments for rural landscape valuation," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 36(2), pages 151-174, June.
  20. Glenn Bush & Sergio Colombo & Nick Hanley, 2009. "Should all Choices Count? Using the Cut-Offs Approach to Edit Responses in a Choice Experiment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 44(3), pages 397-414, November.
  21. Bart Vermeulen & Peter Goos & Riccardo Scarpa & Martina Vandebroek, 2011. "Bayesian Conjoint Choice Designs for Measuring Willingness to Pay," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 48(1), pages 129-149, January.
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Citations

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Cited by:
  1. Thiene, Mara & Meyerhoff, Jürgen & De Salvo, Maria, 2012. "Scale and taste heterogeneity for forest biodiversity: Models of serial nonparticipation and their effects," Journal of Forest Economics, Elsevier, Elsevier, vol. 18(4), pages 355-369.
  2. Stephane Hess & Amanda Stathopoulos & Danny Campbell & Vikki O’Neill & Sebastian Caussade, 2013. "It’s not that I don’t care, I just don’t care very much: confounding between attribute non-attendance and taste heterogeneity," Transportation, Springer, Springer, vol. 40(3), pages 583-607, May.
  3. Boeri, Marco & Scarpa, Riccardo & Chorus, Caspar G., 2014. "Stated choices and benefit estimates in the context of traffic calming schemes: Utility maximization, regret minimization, or both?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 61(C), pages 121-135.
  4. Colombo, Sergio & Christie, Michael & Hanley, Nick, 2013. "What are the consequences of ignoring attributes in choice experiments? Implications for ecosystem service valuation," Ecological Economics, Elsevier, vol. 96(C), pages 25-35.
  5. Collins, Andrew T. & Rose, John M. & Hensher, David A., 2013. "Specification issues in a generalised random parameters attribute nonattendance model," Transportation Research Part B: Methodological, Elsevier, vol. 56(C), pages 234-253.

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