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The effect of individual ‘ability to choose’ (scale heterogeneity) on the valuation of environmental goods

  • Christie, Mike
  • Gibbons, James
Registered author(s):

    Environmental valuation methods, such as choice experiments, are increasingly being used to value complex and often unfamiliar environmental goods. A potential risk is that some survey respondents may not be capable of developing and expressing preferences for such goods. The noise from these individuals may then conceal the well-defined preferences of other respondents and affect valuation estimates. We address this problem by estimating a range of models that accounts for scale heterogeneity (which we interpret as a respondent's ability to choose: ATC) and taste heterogeneity. These models are applied to two case studies: amenity from coastal defence and biodiversity. In both case studies, model fit was improved in a scale-heterogeneity multinomial-logit (S-MNL) model (compared to a standard MNL model) suggesting the accounting for ATC (scale heterogeneity) improved preference revelation. A mixed multinomial-logit (MIXL) model outperformed the S-MNL model suggesting that accounting for taste heterogeneity was also important. However, a generalised multinomial-logit (G-MNL) model improved model fit over the MIXL model only for the biodiversity data suggesting that for these data both taste heterogeneity and ATC were important. We conclude that accounting for ATC can improve the reliability and robustness of the results when valuing complex or unfamiliar environmental goods.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0921800911002862
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    Article provided by Elsevier in its journal Ecological Economics.

    Volume (Year): 70 (2011)
    Issue (Month): 12 ()
    Pages: 2250-2257

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    Handle: RePEc:eee:ecolec:v:70:y:2011:i:12:p:2250-2257
    DOI: 10.1016/j.ecolecon.2011.07.011
    Contact details of provider: Web page: http://www.elsevier.com/locate/ecolecon

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    1. Guy Garrod & Kenneth G. Willis, 1999. "Economic Valuation of the Environment," Books, Edward Elgar Publishing, number 1368.
    2. Swait, Joffre & Adamowicz, Wiktor L., 1999. "Choice Environment, Market Complexity and Consumer Behavior: A Theoretical and Empirical Approach for Incorporating Decision Complexity into Models of Consumer Choice," Staff Paper Series 24093, University of Alberta, Department of Resource Economics and Environmental Sociology.
    3. Adamowicz, Wiktor L. & Louviere, J. & Willians, M., 1992. "Combining Revealed and Stated Preference Methods for Valuing Environmental Amenities," Staff Paper Series 232531, University of Alberta, Department of Resource Economics and Environmental Sociology.
    4. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, Junio.
    5. William Greene & David Hensher, 2010. "Does scale heterogeneity across individuals matter? An empirical assessment of alternative logit models," Transportation, Springer, vol. 37(3), pages 413-428, May.
    6. Christie, Mike & Hanley, Nick & Warren, John & Murphy, Kevin & Wright, Robert & Hyde, Tony, 2006. "Valuing the diversity of biodiversity," Ecological Economics, Elsevier, vol. 58(2), pages 304-317, June.
    7. Denzil G. Fiebig & Michael P. Keane & Jordan Louviere & Nada Wasi, 2010. "The Generalized Multinomial Logit Model: Accounting for Scale and Coefficient Heterogeneity," Marketing Science, INFORMS, vol. 29(3), pages 393-421, 05-06.
    8. 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.
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