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The Effects of Changing Cost Vectors on Choices and Scale Heterogeneity

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  • Marit Kragt

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Abstract

Choice Experiments (CE) are widely used to estimate the values of changes in non-market goods and services. A cost attribute is typically included in a CE questionnaire to enable the estimation of monetary values for changes in the non-market attributes presented. Notwithstanding the central importance of the cost attribute, relatively little research has been undertaken on the impacts of varying cost attribute levels on value estimates, or on individual heterogeneity. In this paper, I present results from mixed logit and generalised mixed logit models that account for unobserved idiosyncratic preference and scale heterogeneity. Respondents are found to anchor their choices on the relative cost levels presented in the survey with results suggesting that people are more sensitive to relative rather than absolute cost vectors. However, the higher cost levels do not lead to significantly higher value estimates, partly because of observed preference heterogeneity towards the environmental attributes. An important observation is that scale heterogeneity is important: accounting for scale— as well as preference—heterogeneity in the generalised mixed logit model leads to significantly improved model fit. The results indicate significant unobserved error variance across respondents, unrelated to whether a high or low cost vector is used. Copyright Springer Science+Business Media B.V. 2013

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  • Marit Kragt, 2013. "The Effects of Changing Cost Vectors on Choices and Scale Heterogeneity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 54(2), pages 201-221, February.
  • Handle: RePEc:kap:enreec:v:54:y:2013:i:2:p:201-221
    DOI: 10.1007/s10640-012-9587-x
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Kragt, Marit Ellen, 2013. "Comparing models of unobserved heterogeneity in environmental choice experiments," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152198, Australian Agricultural and Resource Economics Society.
    2. repec:eee:jeborg:v:145:y:2018:i:c:p:335-351 is not listed on IDEAS
    3. Liesivaara, Petri & Myyrä, Sami, 2017. "The demand for public–private crop insurance and government disaster relief," Journal of Policy Modeling, Elsevier, vol. 39(1), pages 19-34.
    4. Rocamora, Beatriz & Colombo, Sergio & Glenk, Klaus, 2014. "El impacto de las respuestas inconsistentes en las medidas de bienestar estimadas con el método del experimento de elección," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 0(Number 02), pages 1-22, December.
    5. Kragt, Marit Ellen, 2013. "Comparing models of unobserved heterogeneity in environmental choice experiments," Working Papers 144447, University of Western Australia, School of Agricultural and Resource Economics.
    6. John C. Whitehead & Daniel K. Lew, 2016. "Estimating Recreation Benefits through Joint Estimation of Revealed and Stated Preference Discrete Choice Data," Working Papers 16-22, Department of Economics, Appalachian State University.
    7. Kyriaki Remoundou & Fikret Adaman & Phoebe Koundouri & Paulo Nunes, 2014. "Is the value of environmental goods sensitive to the public funding scheme? Evidence from a marine restoration programme in the Black Sea," Empirical Economics, Springer, vol. 47(4), pages 1173-1192, December.
    8. Kyriaki Remoundou & Fikret Adaman & Phoebe Koundouri & Paulo Nunes, "undated". "Is the Value of Environmental Goods Sensitive to the Source of Public Funding? Evidence from a Marine Restoration Programme in the Black Sea," DEOS Working Papers 1321, Athens University of Economics and Business.
    9. Kragt, Marit Ellen, 2013. "Evidence-based Research in Environmental Choice Experiments," Working Papers 153335, University of Western Australia, School of Agricultural and Resource Economics.
    10. repec:eee:ecolec:v:148:y:2018:i:c:p:36-42 is not listed on IDEAS
    11. Lew, Daniel K. & Wallmo, Kristy, 2017. "Temporal stability of stated preferences for endangered species protection from choice experiments," Ecological Economics, Elsevier, vol. 131(C), pages 87-97.
    12. Kragt, Marit Ellen, 2013. "Integrating biophysical and economic systems in a Bayesian Network Hydro-economic framework," Working Papers 153334, University of Western Australia, School of Agricultural and Resource Economics.
    13. Irani, Alexandra & Chalak, Ali, 2015. "Harnessing motorists’ potential demand for hybrid-electric vehicles in Lebanon: Policy options, CO2 emissions reduction and welfare gains," Transport Policy, Elsevier, vol. 42(C), pages 144-155.

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