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Bayesian Estimation of Willingness-to-pay Where Respondents Mis-report Their Preferences

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  • K. Balcombe
  • A. Bailey
  • A. Chalak
  • I. Fraser

Abstract

We introduce a modified conditional logit model that takes account of uncertainty associated with mis-reporting in revealed preference experiments estimating willingness-to-pay (WTP). Like Hausman "et al". ["Journal of Econometrics" (1988) Vol. 87, pp. 239-269], our model captures the extent and direction of uncertainty by respondents. Using a Bayesian methodology, we apply our model to a choice modelling (CM) data set examining UK consumer preferences for non-pesticide food. We compare the results of our model with the Hausman model. WTP estimates are produced for different groups of consumers and we find that modified estimates of WTP, that take account of mis-reporting, are substantially revised downwards. We find a significant proportion of respondents mis-reporting in favour of the non-pesticide option. Finally, with this data set, Bayes factors suggest that our model is preferred to the Hausman model. Copyright 2007 Blackwell Publishing Ltd and the Department of Economics, University of Oxford.

Suggested Citation

  • K. Balcombe & A. Bailey & A. Chalak & I. Fraser, 2007. "Bayesian Estimation of Willingness-to-pay Where Respondents Mis-report Their Preferences," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(3), pages 413-438, June.
  • Handle: RePEc:bla:obuest:v:69:y:2007:i:3:p:413-438
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    References listed on IDEAS

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    1. Raymond J. G. M. Florax & Chiara M. Travisi & Peter Nijkamp, 2005. "A meta-analysis of the willingness to pay for reductions in pesticide risk exposure," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 32(4), pages 441-467, December.
    2. Jeff Bennett & Russell Blamey (ed.), 2001. "The Choice Modelling Approach to Environmental Valuation," Books, Edward Elgar Publishing, number 2028, June.
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    Cited by:

    1. Damian Tago & Henrik Andersson & Nicolas Treich, 2014. "Pesticides and Health: A Review of Evidence on Health Effects, Valuation of Risks, and Benefit-Cost Analysis," Advances in Health Economics and Health Services Research,in: Preference Measurement in Health, volume 24, pages 203-295 Emerald Publishing Ltd.
    2. Ali Chalak & Kelvin Balcombe & Alastair Bailey & Iain Fraser, 2008. "Pesticides, Preference Heterogeneity and Environmental Taxes," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(3), pages 537-554, September.
    3. Rigby, Dan & Burton, Michael & Balcombe, Kelvin & Bateman, Ian & Mulatu, Abay, 2015. "Contract cheating & the market in essays," Journal of Economic Behavior & Organization, Elsevier, vol. 111(C), pages 23-37.
    4. Kelvin Balcombe & Iain Fraser, 2009. "Dichotomous-choice contingent valuation with 'dont know' responses and misreporting," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(7), pages 1137-1152.

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