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Comparing Individual-Specific Benefit Estimates for Public Goods: Finite Versus Continuous Mixing in Logit Models

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  • Riccardo Scarpa

    (University of York)

  • Kenneth G. Willis

    (School of Architecture Landscape and Planning, University of Newcastle Upon Tyne)

  • Melinda Acutt

    (Yorkshire Water)

Abstract

Multi-attribute stated preference data, derived through choice experiments, is used to investigate the consequence of a finite number of preference groups in a sample of Yorkshire Water residential customers on the conditional distributions of willingness to pay in the sample. The research focuses on ‘public good’ values, and retrieves the implicit customer specific welfare measures conditional on a sequence of four observed choices. We assess and contrast the sample evidence for the presence of a finite number of 2, 3, 4 and 5 latent preference groups (classes), and contrast these with the presence of a continuous distribution of parameter estimates using mixed logit models. The main focus is the conditional valuations in the form of marginal values for the consequence of waste water handling and treatment, namely: river water quality, area flooding by sewage, presence of odour and flies, and other water related amenities.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.132.

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Date of creation: Nov 2004
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Handle: RePEc:fem:femwpa:2004.132

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Keywords: Choice experiments; Mixed logit; Latent classes; Individual-specific estimates; Non-market valuation;

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  1. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2, January.
  2. Scarpa, Riccardo & Ruto, Eric S. K. & Kristjanson, Patti & Radeny, Maren & Drucker, Adam G. & Rege, John E. O., 2003. "Valuing indigenous cattle breeds in Kenya: an empirical comparison of stated and revealed preference value estimates," Ecological Economics, Elsevier, vol. 45(3), pages 409-426, July.
  3. Boxall, Peter C. & Adamowicz, Wiktor L., 1999. "Understanding Heterogeneous Preferences in Random Utility Models: The Use of Latent Class Analysis," Staff Paper Series 24090, University of Alberta, Department of Resource Economics and Environmental Sociology.
  4. Bill Provencher & Kenneth A. Baerenklau & Richard C. Bishop, 2002. "A Finite Mixture Logit Model of Recreational Angling with Serially Correlated Random Utility," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 1066-1075.
  5. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
  6. Kenneth Train ., 2000. "Halton Sequences for Mixed Logit," Economics Working Papers E00-278, University of California at Berkeley.
  7. Riccardo Scarpa & Mara Thiene, 2004. "Destination Choice Models for Rock Climbing in the Northeast Alps: A Latent-Class Approach Based on Intensity of Participation," Working Papers 2004.131, Fondazione Eni Enrico Mattei.
  8. Greene, William H. & Hensher, David A., 2003. "A latent class model for discrete choice analysis: contrasts with mixed logit," Transportation Research Part B: Methodological, Elsevier, vol. 37(8), pages 681-698, September.
  9. DeShazo, J. R. & Fermo, German, 2002. "Designing Choice Sets for Stated Preference Methods: The Effects of Complexity on Choice Consistency," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 123-143, July.
  10. Heckman, James J. & Singer, Burton, 1984. "Econometric duration analysis," Journal of Econometrics, Elsevier, vol. 24(1-2), pages 63-132.
  11. Scarpa, Riccardo & Drucker, Adam G. & Anderson, Simon & Ferraes-Ehuan, Nancy & Gomez, Veronica & Risopatron, Carlos R. & Rubio-Leonel, Olga, 2003. "Valuing genetic resources in peasant economies: the case of 'hairless' creole pigs in Yucatan," Ecological Economics, Elsevier, vol. 45(3), pages 427-443, July.
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