How to Deal with Protest Bids and Preference for the Status Quo in Choice Experiments ?
AbstractThis paper deals with the protest bids issue in choice experiments. In the context of the Water Framework Directive, we examined local residents’ preferences for water quality improvements at a specific river basin in France. We used the choice experiment method with site-specific attributes referring to the four sites that compose our basin. We first estimated a random parameters logit model in order to take into account heterogeneity of preferences. We found positive willingness-to-pay for improvements in water quality. Moreover we observed that a significant proportion of respondents always chose the status quo scenario (which referred to the current management regime and was associated with a zero price) irrespective of the choice set she was presented. Status quo responses are considered as being zero bids and may be categorized into two types: true zero bids, where the respondent really places a zero value on the good, and protest bids, where the respondent states a zero willingness-topay even though her true value for the good is positive. We excluded protest bids from the analysis and re-estimated our random parameters logit model. Results showed that protest bids do affect the outcome. In order to take into account the existence of the two types of zero bids when estimating willingness-to-pay, we then proposed a cross-nested logit model. Implicit prices obtained from this model estimation are larger than those obtained from the random parameters logit model estimation. As a result, the cross-nested logit model allows taking into consideration the peculiarity of protest behaviors
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Bibliographic InfoPaper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2012-02.
Date of creation: Jan 2012
Date of revision:
Choice experiments; Cross-nested logit model; Protest bids; Water Framework Directive; Water quality;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-22 (All new papers)
- NEP-DCM-2012-05-22 (Discrete Choice Models)
- NEP-ECM-2012-05-22 (Econometrics)
- NEP-EXP-2012-05-22 (Experimental Economics)
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