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Selecting random parameters in discrete choice experiment for environmental valuation: A simulation experiment

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  • Mariel Chladkova, Petr
  • Abdullah, Sabah
  • De Ayala Bilbao, Amaya
  • Hoyos Ramos, David

Abstract

This paper examines the various tests commonly used to select random parameters in choice modelling. The most common procedures for selecting random parameters are: the Lagrange Multiplier test as proposed by McFadden and Train (2000), the t-statistic of the deviation of the random parameter and the log-likelihood ratio test. The identification of random parameters in other words the recognition of preference heterogeneity among population is based on the fact that an individual makes a choice depending on her/his: tastes, perceptions and experiences. A simulation experiment was carried out based on a real choice experiment and the results indicated that the power of these three tests depends importantly on the spread and type of the tested parameter distribution.

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Bibliographic Info

Paper provided by Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística) in its series BILTOKI with number 2010-09.

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Date of creation: 2010
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Handle: RePEc:ehu:biltok:201009

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Postal: Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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Keywords: choice experiment; simulation; preference heterogeneity; random parameter logit; tests for selecting random parameters;

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References

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  1. Mariel Chladkova, Petr & Hoyos Ramos, David & Fernández Macho, Francisco Javier, 2008. "The influence of cultural identity on the WTP to protect natural resources: some empirical evidence," BILTOKI 2008-03, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística).
  2. Therese Hindman Persson, 2002. "Welfare calculations in models of the demand for sanitation," Applied Economics, Taylor & Francis Journals, vol. 34(12), pages 1509-1518.
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  21. Danny Campbell & W. George Hutchinson & Riccardo Scarpa, 2007. "Using Choice Experiments to Explore the Spatial Distribution of Willingness to Pay for Rural Landscape Improvements," Working Papers in Economics 07/06, University of Waikato, Department of Economics.
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Citations

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Cited by:
  1. De Valck, Jeremy & Vlaeminck, Pieter & Liekens, Inge & Aertsens, Joris & Chen, Wendy & Vranken, Liesbet, 2012. "The sources of preference heterogeneity for nature restoration scenarios," Working Papers 146522, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics.
  2. Greiner, Romy, 2014. "Willingness of north Australian pastoralists and graziers to participate in contractual biodiversity conservation," 2014 Conference (58th), February 4-7, 2014, Port Maquarie, Australia 165839, Australian Agricultural and Resource Economics Society.
  3. Mariel Chladkova, Petr & Etxano Gandariasbeitia, Iker & Hoyos Ramos, David & Garmendia Oleaga, Eneko & Pascual, Unai, 2011. "The management of Natura 2000 Network sites: a discrete choice experiment approach," BILTOKI 2011-02, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística).
  4. Hoyos, David & Mariel, Petr & Pascual, Unai & Etxano, Iker, 2012. "Valuing a Natura 2000 network site to inform land use options using a discrete choice experiment: An illustration from the Basque Country," Journal of Forest Economics, Elsevier, vol. 18(4), pages 329-344.
  5. Hoyos Ramos, David & Mariel Chladkova, Petr & De Ayala Bilbao, Amaya, . "Landscape valuation through discrete choice experiments: Current practice and future research reflections," BILTOKI 2012-03, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística).
  6. Greiner, Romy & Bliemer, Michiel & Ballweg, Julie, 2014. "Design considerations of a choice experiment to estimate likely participation by north Australian pastoralists in contractual biodiversity conservation," Journal of choice modelling, Elsevier, vol. 10(C), pages 34-45.

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