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Estimating willingness-to-pay from discrete choice models: Setting the record straight

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  • Daly, Andrew
  • Hess, Stephane
  • Ortúzar, Juan de Dios

Abstract

The estimation of indicators of willingness-to-pay (WTP) and the computation of associated measures of uncertainty have attracted much interest in the general area of choice modelling, but have also been characterised by a substantial amount of confusion and misguided discussions. We examine this problem in depth, both theoretically and empirically, in an effort to illustrate the most appropriate approaches to solving this problem, which has important repercussions for practice in our field. Our findings should be useful to analysts advising on transport policy and infrastructure project evaluation, in particular when requiring estimates of the value of travel time.

Suggested Citation

  • Daly, Andrew & Hess, Stephane & Ortúzar, Juan de Dios, 2023. "Estimating willingness-to-pay from discrete choice models: Setting the record straight," Transportation Research Part A: Policy and Practice, Elsevier, vol. 176(C).
    • Handle: RePEc:eee:transa:v:176:y:2023:i:c:s0965856423002483
    DOI: 10.1016/j.tra.2023.103828
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    References listed on IDEAS

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    1. Palma, David & Ortúzar, Juan de Dios & Rizzi, Luis Ignacio & Guevara, Cristian Angelo & Casaubon, Gerard & Ma, Huiqin, 2016. "Modelling choice when price is a cue for quality: a case study with Chinese consumers," Journal of choice modelling, Elsevier, vol. 19(C), pages 24-39.
    2. Carson, Richard T. & Czajkowski, Mikołaj, 2019. "A new baseline model for estimating willingness to pay from discrete choice models," Journal of Environmental Economics and Management, Elsevier, vol. 95(C), pages 57-61.
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    Cited by:

    1. Quainoo, Ruth & Howard, Gregory & Gaur, Vasundhara & Lang, Corey, 2024. "Model choice and framing effects: Do discrete choice modeling decisions affect loss aversion estimates?," Journal of choice modelling, Elsevier, vol. 53(C).

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