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The Effect of Including Irrelevant Alternatives in Discrete Choice Models of Recreation Demand

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Listed:
  • John N. Ng’ombe

    (Oklahoma State University
    University of Zambia)

  • B. Wade Brorsen

    (Oklahoma State University)

Abstract

We measure bias and efficiency of parameter estimates in the conditional logit (CL) and independent availability logit (IAL) models. Our Monte Carlo experiments consider both no choice set formation where individuals choose from the full set of alternatives, and when choice sets are stochastically formed and individuals choose from a subset of all alternatives. We also compare the performance of the two models using empirical data on paddlefish angler preferences and catch-and-release regulations in Oklahoma. Both the CL and IAL work well when their own assumptions hold, but not under the alternative’s assumptions. The IAL approximates the attribute-based cutoff well in empirical data. While neither the IAL nor the CL is universally preferred, based on our findings, we recommend the IAL when the true consideration sets are unknown.

Suggested Citation

  • John N. Ng’ombe & B. Wade Brorsen, 2022. "The Effect of Including Irrelevant Alternatives in Discrete Choice Models of Recreation Demand," Computational Economics, Springer;Society for Computational Economics, vol. 60(1), pages 71-97, June.
    • Handle: RePEc:kap:compec:v:60:y:2022:i:1:d:10.1007_s10614-021-10138-1
    DOI: 10.1007/s10614-021-10138-1
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    More about this item

    Keywords

    Choice set specification; Conditional logit; Independent availability logit; Monte Carlo experiments; Travel cost cutoffs;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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