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Latent Thresholds Analysis of Choice Data with Multiple Bids and Response Options

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  • Mimako Kobayashi

    () (Department of Resource Economics, University of Nevada, Reno)

  • Klaus Moeltner

    () (Department of Resource Economics, University of Nevada, Reno)

  • Kimberly Rollins

    () (Department of Resource Economics, University of Nevada, Reno)

Abstract

In many stated preference settings stakeholders will be uncertain as to their exact willingness-to-pay for a proposed environmental amenity. To accommodate this possibility analysts have designed elicitation formats with multiple bids and response options that allow for the expression of uncertainty. We argue that the information content flowing from such elicitation has not yet been fully and efficiently exploited in existing contributions. We introduce a Latent Thresholds Estimator that focuses on the simultaneous identification of the full set of thresholds that delineate an individual's value space in accordance with observed response categories. Our framework provides a more complete picture of the underlying value distribution, the marginal effects of regressors, and the impact of bid designs on estimation efficiency. We show that the common practice of re-coding responses to derive point estimate of willingness-to-pay leaves useful information untapped and can produce misleading results if thresholds are highly correlated.

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File URL: http://www.coba.unr.edu/econ/wp/papers/UNRECONWP10001.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by University of Nevada, Reno, Department of Economics & University of Nevada, Reno , Department of Resource Economics in its series Working Papers with number 10-001.

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Length: 39 pages
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:unr:wpaper:10-001

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Related research

Keywords: Stated Preference; Multiple Bounded Elicitation; Polychotomous Choice; Bayesian Estimation; Value Uncertainty;

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  1. Akter, Sonia & Brouwer, Roy & Brander, Luke & van Beukering, Pieter, 2009. "Respondent uncertainty in a contingent market for carbon offsets," Ecological Economics, Elsevier, vol. 68(6), pages 1858-1863, April.
  2. Akter, Sonia & Bennett, Jeff & Akhter, Sanzida, 2008. "Preference uncertainty in contingent valuation," Ecological Economics, Elsevier, vol. 67(3), pages 345-351, October.
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