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Combining Discrete and Continuous Representations of Preference Heterogeneity: A Latent Class Approach

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  • Angel Bujosa
  • Antoni Riera
  • Robert Hicks

Abstract

This paper investigates heterogeneity in preferences for forest recreators in Mallorca, Spain. We develop a latent class approach combining discrete and continuous representations of tastes and compare it with the conventional latent class and random parameter logit approaches. We investigate the performance of the discrete-continuous model by comparing welfare estimates and predictive accuracy. The discrete-continuous model outperforms latent class and mixed logit approaches when comparing goodness-of-fit and in- sample site-choice forecasts. We find that the discrete-continuous model for preference heterogeneity reveals variation among individuals' preferences and WTP, and for some policy changes our results reveal striking differences in means and distributions of WTP.
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  • Angel Bujosa & Antoni Riera & Robert Hicks, 2010. "Combining Discrete and Continuous Representations of Preference Heterogeneity: A Latent Class Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 47(4), pages 477-493, December.
  • Handle: RePEc:kap:enreec:v:47:y:2010:i:4:p:477-493
    DOI: 10.1007/s10640-010-9389-y
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