Advanced Search
MyIDEAS: Login to save this paper or follow this series

Biases in Willingness-To-Pay Measures from Multinomial Logit Estimates due to Unobserved Heterogeneity


Author Info

  • Vincent van den Berg

    (VU University Amsterdam)

  • Eric Kroes

    (VU University Amsterdam)

  • Erik T. Verhoef

    (VU University Amsterdam)


It is a common finding in empirical discrete choice studies that the estimated mean relative values of the coefficients (i.e. WTP's) from multinomial logit (MNL) estimations differ from those calculated using mixed logit estimations, where the mixed logit has the better statistical fit. However, it is less clear under exactly what circumstances such differences arise, whether they are important, and if they can be seen as biases in the WTP estimates from MNL. We use datasets created by Monte Carlo simulation to test, in a controlled environment, the effects of the different possible sources of bias on the accuracy of WTP's estimated by MNL. Consistent with earlier research we find that random unobserved heterogeneity in the marginal utilities does not in itself biases the MNL estimates. Furthermore, whether or not the unobserved heterogeneity is symmetrically shaped also does not affect the accuracy of the WTP estimates of MNL. However, we find that if two heterogeneous marginal utilities are correlated then the WTP's from MNL may be biased. If the correlation between the marginal utilities is negative, then the bias in the MNL estimate is negative, whereas if the correlation is positive the bias is positive.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
Download Restriction: no

Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 10-014/3.

as in new window
Date of creation: 28 Jan 2010
Date of revision:
Handle: RePEc:dgr:uvatin:20100014

Contact details of provider:
Web page:

Related research

Keywords: Discrete Choice; Biases in WTP's; Multinomial Logit; Correlated Heterogeneous Marginal Utilities;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Luis I. Rizzi & Juan de Dios Ort�zar, 2006. "Road Safety Valuation under a Stated Choice Framework," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 40(1), pages 69-94, January.
  2. Bhat, Chandra R., 1998. "Accommodating flexible substitution patterns in multi-dimensional choice modeling: formulation and application to travel mode and departure time choice," Transportation Research Part B: Methodological, Elsevier, vol. 32(7), pages 455-466, September.
Full references (including those not matched with items on IDEAS)


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Martine Audibert & Yong He & Jacky Mathonnat, 2013. "Multinomial and Mixed Logit Modeling in the Presence of Heterogeneity: A Two-Period Comparison of Healthcare Provider Choice in Rural China," Working Papers halshs-00846085, HAL.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:dgr:uvatin:20100014. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antoine Maartens (+31 626 - 160 892)).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.