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Modelling preference heterogeneity in stated choice data: an analysis for public goods generated by agriculture

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  • Colombo, Sergio
  • Hanley, Nicholas
  • Louviere, Jordan

Abstract

Stated choice models based on the random utility framework are becoming increasingly popular in the applied economics literature. The need to account for respondents' preference heterogeneity in such models has motivated researchers in agricultural, environmental, health and transport economics to apply random parameter logit and latent class models. In most of the published literature these models incorporate heterogeneity in preferences through the systematic component of utility. An alternative approach is to investigate heterogeneity through the random component of utility, and covariance heterogeneity models are one means of doing this. In this paper we compare these alternative ways of incorporating preference heterogeneity in stated choice models and evaluate how the selection of approach affects welfare estimates in a given empirical application. We find that a Latent Class approach fits our data best but all the models perform well in terms of out-of-sample predictions. Finally, we discuss what criteria a researcher can use to decide which approach is most appropriate for a given data set.

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Bibliographic Info

Paper provided by University of Stirling, Division of Economics in its series Stirling Economics Discussion Papers with number 2008-28.

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Date of creation: Dec 2008
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Handle: RePEc:stl:stledp:2008-28

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Postal: Division of Economics, University of Stirling, Stirling, Scotland FK9 4LA
Phone: +44 (0)1786 467473
Fax: +44 (0)1786 467469
Web page: http://www.econ.stir.ac.uk/
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Related research

Keywords: welfare measures; error component models; random parameter logit model; preference heterogeneity; latent class model; landscape values; agri-environmental policy; covariance heterogeneity model; choice experiments;

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References

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Citations

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Cited by:
  1. Kragt, Marit E., 2013. "Comparing models of unobserved heterogeneity in environmental choice experiments," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152198, Australian Agricultural and Resource Economics Society.
  2. Colombo, Sergio & Hanley, Nicholas & Torres, Cati, 2011. "Incorrectly accounting for taste heterogeneity in choice experiments: Does it really matter for welfare measurement?," Stirling Economics Discussion Papers 2011-02, University of Stirling, Division of Economics.
  3. Kikulwe, Enoch & Birol, Ekin & Wesseler, Justus & Falck-Zepeda, José, 2009. "A latent class approach to investigating consumer demand for genetically modified staple food in a developing country: The case of GM bananas in Uganda," IFPRI discussion papers 938, International Food Policy Research Institute (IFPRI).
  4. Glenk, Klaus & Hall, Clare & Liebe, Ulf & Meyerhoff, Jürgen, 2012. "Preferences of Scotch malt whisky consumers for changes in pesticide use and origin of barley," Food Policy, Elsevier, vol. 37(6), pages 719-731.
  5. Crabbe, M. & Vandebroek, M., 2012. "Improving the efficiency of individualized designs for the mixed logit choice model by including covariates," Computational Statistics & Data Analysis, Elsevier, vol. 56(6), pages 2059-2072.
  6. Tadao Hoshino, 2013. "Estimation of the preference heterogeneity within stated choice data using semiparametric varying-coefficient methods," Empirical Economics, Springer, vol. 45(3), pages 1129-1148, December.
  7. Ward, Patrick S. & Ortega, David L. & Spielman, David J. & Singh, Vartika & Magnan, Nicholas, 2013. "Farmer Preferences for Abiotic Stress Tolerance in Hybrid versus Inbred Rice: Evidence from Bihar, India," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150786, Agricultural and Applied Economics Association.
  8. Speelman, Stijn & Veettil, Prakashan Chellattan, 2013. "Heterogeneous preferences for water rights reforms among smallholder irrigators in South Africa," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), issue 2, August.
  9. Kikulwe, Enoch M. & Birol, Ekin & Wesseler, Justus & Falck-Zepeda, Jose Benjamin, 2013. "Benefits, costs, and consumer perceptions of the potential introduction of a fungus-resistant banana in Uganda and policy implications," IFPRI book chapters, in: Falck-Zepeda, Jose Benjamin & Gruère, Guillaume P. & Sithole-Niang, Idah (ed.), Genetically modified crops in Africa: Economic and policy lessons from countries south of the Sahara, chapter 4, pages 99-141 International Food Policy Research Institute (IFPRI).
  10. Rocamora-Montiel, Beatriz & Colombo, Sergio & Salazar-Ordóñez, Melania, 2014. "Social attitudes in southern Spain to shape EU agricultural policy," Journal of Policy Modeling, Elsevier, vol. 36(1), pages 156-171.
  11. Marcucci, Edoardo & Gatta, Valerio, 2012. "Dissecting preference heterogeneity in consumer stated choices," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(1), pages 331-339.
  12. Miller, Sini & Tait, Peter & Saunders, Caroline, 2013. "Scarcity Of Canterbury’s Water: Its Multiple, Conflicting Uses," 2013 Conference, August 28-30, 2013, Christchurch, New Zealand 160269, New Zealand Agricultural and Resource Economics Society.
  13. Meyerhoff, Jürgen & Ohl, Cornelia & Hartje, Volkmar, 2010. "Landscape externalities from onshore wind power," Energy Policy, Elsevier, vol. 38(1), pages 82-92, January.
  14. Howard, Gregory & Roe, Brian E, 2013. "Stripping Because You Want to Versus Stripping Because the Money is Good: A Latent Class Analysis of Farmer Preferences Regarding Filter Strip Programs," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149821, Agricultural and Applied Economics Association.
  15. Birol, Ekin & Asare-Marfo, Dorene & Karandikar,Bhushana & Roy, Devesh, 2011. "A latent class approach to investigating farmer demand for biofortified staple food crops in developing countries: The case of high-iron pearl millet in Maharashtra, India," HarvestPlus Working Papers 7, International Food Policy Research Institute (IFPRI).
  16. Skreli, Engjell & Imami, Drini, 2012. "Analyzing Consumers’ Preferences for Apple Attributes in Tirana, Albania," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 15(4).
  17. Meyerhoff, Jürgen, 2013. "Do turbines in the vicinity of respondents' residences influence choices among programmes for future wind power generation?," Journal of choice modelling, Elsevier, vol. 7(C), pages 58-71.
  18. Moser, Riccarda & Raffaelli, Roberta, 2011. "Exploiting cut-off information to incorporate context effect: a discrete choice experiment on small fruits in a Alpine region," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114646, European Association of Agricultural Economists.

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