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Lexicographic Preferences in Discrete Choice Experiments: Consequences on Individual-Specific Willingness to Pay Estimates

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Author Info
Danny Campbell (Gibson Institute of Land, Food and Environmen, Queen’s University Belfast)
W. George Hutchinson (Gibson Institute of Land, Food and Environmen, Queen’s University Belfast)
Riccardo Scarpa (University of Waikato)

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Abstract

In discrete choice experiments respondents are generally assumed to consider all of the attributes across each of the alternatives, and to choose their most preferred. However, results in this paper indicate that many respondents employ simplified lexicographic decision-making rules, whereby they have a ranking of the attributes, but their choice of an alternative is based solely on the level of their most important attribute(s). Not accounting for these simple decision-making heuristics introduces systemic errors and leads to biased point estimates, as they are a violation of the continuity axiom and a departure from the use of compensatory decision-making. In this paper the implications of lexicographic preferences are examined. In particular, using a mixed logit specification this paper investigates the sensitivity of individual-specific willingness to pay (WTP) estimates conditional on whether lexicographic decision-making rules are accounted for in the modelling of discrete choice responses. Empirical results are obtained from a discrete choice experiment that was carried out to address the value of a number of rural landscape attributes in Ireland.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2006.128.

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Date of creation: Oct 2006
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Handle: RePEc:fem:femwpa:2006.128

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Related research
Keywords: Continuity axiom; Discrete Choice Experiments; Lexicographic Preferences; Mixed Logit; Individual-Specific Willingness to Pay;

Find related papers by JEL classification:
C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models
Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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Cited by:
(explanations, 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.)

  1. Rambonilaza, Tina, 2005. "Land-use planning and public preferences: What can we learn from choice experiments method?," MPRA Paper 9225, University Library of Munich, Germany, revised May 2007. [Downloadable!]
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