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Selecting random parameters in discrete choice experiment for environmental valuation: A simulation experiment

  • Mariel Chladkova, Petr
  • Abdullah, Sabah
  • De Ayala Bilbao, Amaya
  • Hoyos Ramos, David

This paper examines the various tests commonly used to select random parameters in choice modelling. The most common procedures for selecting random parameters are: the Lagrange Multiplier test as proposed by McFadden and Train (2000), the t-statistic of the deviation of the random parameter and the log-likelihood ratio test. The identification of random parameters in other words the recognition of preference heterogeneity among population is based on the fact that an individual makes a choice depending on her/his: tastes, perceptions and experiences. A simulation experiment was carried out based on a real choice experiment and the results indicated that the power of these three tests depends importantly on the spread and type of the tested parameter distribution.

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File URL: http://hdl.handle.net/10810/5564
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Paper provided by Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística) in its series BILTOKI with number 2010-09.

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Date of creation: 2010
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Handle: RePEc:ehu:biltok:201009
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Order Information: Postal: Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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  9. Mariel Chladkova, Petr & Fernández Macho, Francisco Javier & Hoyos Ramos, David, 2008. "The influence of cultural identity on the WTP to protect natural resources: some empirical evidence," BILTOKI 2008-03, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística).
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  20. Brey, Raul & Riera, Pere & Mogas, Joan, 2007. "Estimation of forest values using choice modeling: An application to Spanish forests," Ecological Economics, Elsevier, vol. 64(2), pages 305-312, December.
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