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

Author

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

Abstract

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.

Suggested Citation

  • Campbell, Danny & Doherty, Edel & Hynes, Stephen & van Rensburg, Tom M., 2010. "Combining discrete and continuous mixing approaches to accommodate heterogeneity in price sensitivities in environmental choice analysis," 84th Annual Conference, March 29-31, 2010, Edinburgh, Scotland 91723, Agricultural Economics Society.
    • Handle: RePEc:ags:aesc10:91723
    DOI: 10.22004/ag.econ.91723
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    Cited by:

    1. Yuan, Yuan & You, Wen & Boyle, Kevin J., 2015. "A guide to heterogeneity features captured by parametric and nonparametric mixing distributions for the mixed logit model," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205733, Agricultural and Applied Economics Association.
    2. Erlend Dancke Sandorf & Danny Campbell & Nick Hanley, 2015. "Disentangling the Influence of Knowledge on Processing Strategies in Choice Modelling," Discussion Papers in Environment and Development Economics 2015-02, University of St. Andrews, School of Geography and Sustainable Development.
    3. Bruno Lanz & Allan Provins, 2013. "Valuing Local Environmental Amenity with Discrete Choice Experiments: Spatial Scope Sensitivity and Heterogeneous Marginal Utility of Income," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(1), pages 105-130, September.
    4. Erlend Dancke Sandorf, 2019. "Did You Miss Something? Inattentive Respondents in Discrete Choice Experiments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(4), pages 1197-1235, August.

    More about this item

    Keywords

    Environmental Economics and Policy;

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