Combining discrete and continuous mixing approaches to accommodate heterogeneity in price sensitivities in environmental choice analysis
AbstractData from a discrete choice experiment aimed at eliciting the demand for recreational walking trails on farmland in the Republic of Ireland is used to explore the consequences of misspecifying the cost coefficient. To enable straightforward calculation of WTP from the distributions of the non-price coefficients, the price coefficient is typically held constant in mixed logit models. This implies that all respondents are equally price sensitive. In this paper we test the validity of this assumption. Our approach is based on a comparison and combination of discrete and continuous mixing approaches (i.e., a mixture of distributions) to uncover the unobserved heterogeneity in price sensitivities. Results from the analysis highlight that model fit and willingness to pay are sensitive to the distributional assumptions used to represent the price coefficient.
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Bibliographic InfoPaper provided by Agricultural Economics Society in its series 84th Annual Conference, March 29-31, 2010, Edinburgh, Scotland with number 91723.
Date of creation: 29 Mar 2010
Date of revision:
discrete choice experiments; discrete mixtures; continuous mixtures; mixtures of distributions; price sensitivities; farmland recreation; willing to pay space; Environmental Economics and Policy;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-17 (All new papers)
- NEP-DCM-2010-07-17 (Discrete Choice Models)
- NEP-ENV-2010-07-17 (Environmental Economics)
- NEP-TUR-2010-07-17 (Tourism Economics)
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- Bruno Lanz & Allan Provins, 2011.
"Valuing Local Environmental Amenity with Discrete Choice Experiments: Spatial Scope Sensitivity and Heterogeneous Marginal Utility of Income,"
CEPE Working paper series
11-79, CEPE Center for Energy Policy and Economics, ETH Zurich.
- Bruno Lanz & Allan Provins, 2013. "Valuing Local Environmental Amenity with Discrete Choice Experiments: Spatial Scope Sensitivity and Heterogeneous Marginal Utility of Income," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 56(1), pages 105-130, September.
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