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Comparing models of unobserved heterogeneity in environmental choice experiments

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  • Kragt, Marit Ellen

Abstract

Choice experiments have become a widespread approach to non-market environmental valuation. Given the vast range of public opinions towards environmental management changes, it is desirable that analysis of discrete choice data accounts for the possibility of unobserved heterogeneity amongst the population. There is, however, no consensus about the best way to model individual heterogeneity. This paper presents four approaches to modelling heterogeneity that are increasingly used in the literature. Latent class, mixed logit, scaled multinomial logit and generalised mixed logit (GMXL) models are estimated using case study data for catchment environmental management in Australia. A GMXL model that accounts for preference and scale heterogeneity performs best. I evaluate the impacts of models on welfare estimates and discuss the merits of each modelling approach.

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Paper provided by University of Western Australia, School of Agricultural and Resource Economics in its series Working Papers with number 144447.

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Date of creation: 10 Feb 2013
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Handle: RePEc:ags:uwauwp:144447

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Keywords: Choice Modelling; Econometrics; Random Parameters; Scale Heterogeneity; Unobserved Preference Heterogeneity; Environmental Economics and Policy; Research Methods/ Statistical Methods; C01; Q51 and Q59;

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