IDEAS home Printed from https://ideas.repec.org/a/kap/enreec/v73y2019i1d10.1007_s10640-018-0250-z.html
   My bibliography  Save this article

Do Random Coefficients and Alternative Specific Constants Improve Policy Analysis? An Empirical Investigation of Model Fit and Prediction

Author

Listed:
  • H. Allen Klaiber

    (The Ohio State University)

  • Roger H. von Haefen

    (North Carolina State University)

Abstract

Concerns about unobserved heterogeneity—either in preference or attribute space—have led environmental economists to turn increasingly to discrete choice models that incorporate random parameters and alternative specific constants. We use four recreation data sets and several empirical specifications to show that although these modeling innovations often lead to substantial improvements in overall model fit, they also generate poor in-sample predictions relative to observed choices. Given the apparent tradeoff between fit and prediction, we then propose and empirically investigate a series of ‘second-best’ strategies that attempt to correct for the poor prediction we observe.

Suggested Citation

  • H. Allen Klaiber & Roger H. von Haefen, 2019. "Do Random Coefficients and Alternative Specific Constants Improve Policy Analysis? An Empirical Investigation of Model Fit and Prediction," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(1), pages 75-91, May.
  • Handle: RePEc:kap:enreec:v:73:y:2019:i:1:d:10.1007_s10640-018-0250-z
    DOI: 10.1007/s10640-018-0250-z
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10640-018-0250-z
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s10640-018-0250-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Timmins, Christopher & Murdock, Jennifer, 2007. "A revealed preference approach to the measurement of congestion in travel cost models," Journal of Environmental Economics and Management, Elsevier, vol. 53(2), pages 230-249, March.
    2. von Haefen, Roger H. & Phaneuf, Daniel J., 2008. "Identifying demand parameters in the presence of unobservables: A combined revealed and stated preference approach," Journal of Environmental Economics and Management, Elsevier, vol. 56(1), pages 19-32, July.
    3. Patrick Bayer & Christopher Timmins, 2007. "Estimating Equilibrium Models Of Sorting Across Locations," Economic Journal, Royal Economic Society, vol. 117(518), pages 353-374, March.
    4. Adamowicz, Wiktor & Swait, Joffre & Boxall, Peter & Louviere, Jordan & Williams, Michael, 1997. "Perceptions versus Objective Measures of Environmental Quality in Combined Revealed and Stated Preference Models of Environmental Valuation," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 65-84, January.
    5. von Haefen, Roger H., 2003. "Incorporating observed choice into the construction of welfare measures from random utility models," Journal of Environmental Economics and Management, Elsevier, vol. 45(2), pages 145-165, March.
    6. Murdock, Jennifer, 2006. "Handling unobserved site characteristics in random utility models of recreation demand," Journal of Environmental Economics and Management, Elsevier, vol. 51(1), pages 1-25, January.
    7. Kenneth E. Train & Clifford Winston, 2007. "Vehicle Choice Behavior And The Declining Market Share Of U.S. Automakers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(4), pages 1469-1496, November.
    8. Angel Bujosa & Antoni Riera & Robert Hicks & Kenneth McConnell, 2015. "Densities Rather than Shares: Improving the Measurement of Congestion in Recreation Demand Models," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 61(2), pages 127-140, June.
    9. M. K. Haener & P. C. Boxall & W. L. Adamowicz, 2001. "Modeling Recreation Site Choice: Do Hypothetical Choices Reflect Actual Behavior?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 629-642.
    10. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
    11. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
    12. Stephen Hynes & Nick Hanley & Riccardo Scarpa, 2008. "Effects on Welfare Measures of Alternative Means of Accounting for Preference Heterogeneity in Recreational Demand Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 1011-1027.
    13. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555.
    14. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    15. Riccardo Scarpa & Mara Thiene & Kenneth Train, 2008. "Utility in Willingness to Pay Space: A Tool to Address Confounding Random Scale Effects in Destination Choice to the Alps," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 994-1010.
    16. Klaus Moeltner & Roger von Haefen, 2011. "Microeconometric Strategies for Dealing with Unobservables and Endogenous Variables in Recreation Demand Models," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 375-396, October.
    17. Allen Klaiber, H. & Phaneuf, Daniel J., 2010. "Valuing open space in a residential sorting model of the Twin Cities," Journal of Environmental Economics and Management, Elsevier, vol. 60(2), pages 57-77, September.
    18. Bayer, Patrick & Keohane, Nathaniel & Timmins, Christopher, 2009. "Migration and hedonic valuation: The case of air quality," Journal of Environmental Economics and Management, Elsevier, vol. 58(1), pages 1-14, July.
    19. Scarpa, R. & Thiene, M. & Train, K., 2008. "Appendix to Utility in WTP space: a tool to address confounding random scale effects in destination choice to the Alps," American Journal of Agricultural Economics APPENDICES, Agricultural and Applied Economics Association, vol. 90(4), pages 1-9, January.
    20. J. Scott Shonkwiler & Jeffrey Englin, 2005. "Welfare Losses Due to Livestock Grazing on Public Lands: A Count Data Systemwide Treatment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(2), pages 302-313.
    21. Gourieroux, Christian & Monfort, Alain & Trognon, Alain, 1984. "Pseudo Maximum Likelihood Methods: Applications to Poisson Models," Econometrica, Econometric Society, vol. 52(3), pages 701-720, May.
    22. Tra, Constant I., 2010. "A discrete choice equilibrium approach to valuing large environmental changes," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 183-196, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David Boto‐García & Antonio Alvarez & José Baños, 2021. "Modelling heterogeneous preferences for nature‐based tourism trips," Papers in Regional Science, Wiley Blackwell, vol. 100(6), pages 1625-1653, December.
    2. Juan M. Gonzalez Sepulveda & F. Reed Johnson & Deborah A. Marshall, 2021. "Incomplete information and irrelevant attributes in stated‐preference values for health interventions," Health Economics, John Wiley & Sons, Ltd., vol. 30(11), pages 2637-2648, November.
    3. Howard, Gregory & Whitehead, John C. & Hochard, Jacob, 2021. "Estimating discount rates using referendum-style choice experiments: An analysis of multiple methodologies," Journal of Environmental Economics and Management, Elsevier, vol. 105(C).
    4. Stefano Mainardi, 2021. "Preference heterogeneity, neighbourhood effects and basic services: logit kernel models for farmers’ climate adaptation in Ethiopia," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(5), pages 6869-6912, May.
    5. Ulrich B. Morawetz & H. Allen Klaiber, 2022. "Does housing policy impact income sorting near urban amenities? Evidence from Vienna, Austria," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 69(2), pages 411-454, October.
    6. Gregory Howard & John C. Whitehead & Jacob Hochard, 2020. "Estimating Discount Rates Using Referendum-style Choice Experiments: An Analysis of Multiple Methods," Working Papers 20-01, Department of Economics, Appalachian State University.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. von Haefen, Roger H. & Phaneuf, Daniel J., 2008. "Identifying demand parameters in the presence of unobservables: A combined revealed and stated preference approach," Journal of Environmental Economics and Management, Elsevier, vol. 56(1), pages 19-32, July.
    2. Abildtrup, Jens & Garcia, Serge & Olsen, Søren Bøye & Stenger, Anne, 2013. "Spatial preference heterogeneity in forest recreation," Ecological Economics, Elsevier, vol. 92(C), pages 67-77.
    3. Hocheol Jeon & Joseph A. Herriges, 2017. "Combining Revealed Preference Data with Stated Preference Data: A Latent Class Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(4), pages 1053-1086, December.
    4. von Haefen, Roger H. & Domanski, Adam, 2018. "Estimation and welfare analysis from mixed logit models with large choice sets," Journal of Environmental Economics and Management, Elsevier, vol. 90(C), pages 101-118.
    5. Daan Hulshof & Machiel Mulder, 2020. "Willingness to Pay for $$\hbox {CO}_2$$CO2 Emission Reductions in Passenger Car Transport," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(4), pages 899-929, April.
    6. Nicolai V. Kuminoff & V. Kerry Smith & Christopher Timmins, 2010. "The New Economics of Equilibrium Sorting and its Transformational Role for Policy Evaluation," NBER Working Papers 16349, National Bureau of Economic Research, Inc.
    7. Nicolai V. Kuminoff & V. Kerry Smith & Christopher Timmins, 2013. "The New Economics of Equilibrium Sorting and Policy Evaluation Using Housing Markets," Journal of Economic Literature, American Economic Association, vol. 51(4), pages 1007-1062, December.
    8. Melstrom, Richard & Lupi, Frank, 2012. "Using a Control Function to Resolve the Travel Cost Endogeneity Problem in Recreation Demand Models," MPRA Paper 48036, University Library of Munich, Germany, revised May 2013.
    9. Juutinen, Artti & Kosenius, Anna-Kaisa & Ovaskainen, Ville, 2014. "Estimating the benefits of recreation-oriented management in state-owned commercial forests in Finland: A choice experiment," Journal of Forest Economics, Elsevier, vol. 20(4), pages 396-412.
    10. Teferi, Ermias Tesfaye & Kassie, Girma T. & Pe, Mario Enrico & Fadda, Carlo, 2020. "Are farmers willing to pay for climate related traits of wheat? Evidence from rural parts of Ethiopia," Agricultural Systems, Elsevier, vol. 185(C).
    11. Klaiber, H. Allen, 2014. "Migration and household adaptation to climate: A review of empirical research," Energy Economics, Elsevier, vol. 46(C), pages 539-547.
    12. Teulings, Coen N. & Ossokina, Ioulia V. & de Groot, Henri L.F., 2018. "Land use, worker heterogeneity and welfare benefits of public goods," Journal of Urban Economics, Elsevier, vol. 103(C), pages 67-82.
    13. David A. Keiser, 2018. "The Missing Benefits of Clean Water and the Role of Mismeasured Pollution," Center for Agricultural and Rural Development (CARD) Publications 18-wp581, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    14. Richard T. Melstrom & Deshamithra H. W. Jayasekera, 2017. "Two-Stage Estimation to Control for Unobservables in a Recreation Demand Model with Unvisited Sites," Land Economics, University of Wisconsin Press, vol. 93(2), pages 328-341.
    15. Sandra Rousseau & Marieke Franck & Simon De Jaeger, 2020. "The Impact of Spatial Patterns in Road Traffic Externalities on Willingness-to-Pay Estimates," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(2), pages 271-295, February.
    16. Sinha, Paramita & Caulkins, Martha L. & Cropper, Maureen L., 2018. "Household location decisions and the value of climate amenities," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 608-637.
    17. José L. Oviedo & Hong Il Yoo, 2017. "A Latent Class Nested Logit Model for Rank-Ordered Data with Application to Cork Oak Reforestation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(4), pages 1021-1051, December.
    18. Phaneuf, Daniel J. & Carbone, Jared C. & Herriges, Joseph A., 2009. "Non-price equilibria for non-marketed goods," Journal of Environmental Economics and Management, Elsevier, vol. 57(1), pages 45-64, January.
    19. Coote, Leonard V. & Swait, Joffre & Adamowicz, Wiktor, 2021. "Separating generalizable from source-specific preference heterogeneity in the fusion of revealed and stated preferences," Journal of choice modelling, Elsevier, vol. 40(C).
    20. Holland, Benedict M. & Johnston, Robert J., 2017. "Optimized quantity-within-distance models of spatial welfare heterogeneity," Journal of Environmental Economics and Management, Elsevier, vol. 85(C), pages 110-129.

    More about this item

    Keywords

    Discrete choice; Recreation demand; Revealed preference; Stated preference; Alternative specific constants; Random parameters;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:enreec:v:73:y:2019:i:1:d:10.1007_s10640-018-0250-z. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.