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Combining discrete and continuous mixing approaches to accommodate heterogeneity in price sensitivities in environmental choice analysis

  • Campbell, Danny
  • Doherty, Edel
  • Hynes, Stephen
  • van Rensburg, Tom M.

Data from a discrete choice experiment aimed at eliciting the demand for recreational walking trails on farmland in the Republic of Ireland is used to explore the consequences of misspecifying the cost coefficient. To enable straightforward calculation of WTP from the distributions of the non-price coefficients, the price coefficient is typically held constant in mixed logit models. This implies that all respondents are equally price sensitive. In this paper we test the validity of this assumption. Our approach is based on a comparison and combination of discrete and continuous mixing approaches (i.e., a mixture of distributions) to uncover the unobserved heterogeneity in price sensitivities. Results from the analysis highlight that model fit and willingness to pay are sensitive to the distributional assumptions used to represent the price coefficient.

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File URL: http://purl.umn.edu/91723
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Paper provided by Agricultural Economics Society in its series 84th Annual Conference, March 29-31, 2010, Edinburgh, Scotland with number 91723.

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Date of creation: 29 Mar 2010
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Handle: RePEc:ags:aesc10:91723
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