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Accounting for WTP/WTA discrepancy in discrete choice models: Discussion of policy implications based on two freight transport stated choice experiments

Author

Listed:
  • Lorenzo Masiero

    (Institute for Economic Research (IRE), Faculty of Economics, University of Lugano, Switzerland)

  • Rico Maggi

    (Institute for Economic Research (IRE), Faculty of Economics, University of Lugano, Switzerland)

Abstract

A key input in cost-benefit analysis is represented by the marginal rate of substitution which expresses the willingness to pay, or its counterpart willingness to accept, for both market and non-market goods. The consistent discrepancy between these two measures observed in the literature suggests the need to estimate reference dependent models able to capturing loss aversion by distinguishing the value attached to a gain from the value attached to a loss according to reference dependent theory. This paper proposes a comparison of willingness to pay and willingness to accept measures estimated from models with both symmetric and reference dependent utility specifications within two different freight transport stated choice experiments. The results show that the reference dependent specification outperforms the symmetric specification and they prove the robustness of reference dependent specification over datasets designed according different attributes levels ranges. Moreover we demonstrate the policy relevance of asymmetric specifications illustrating the strong implications for cost-benefit analysis in two case studies.

Suggested Citation

  • Lorenzo Masiero & Rico Maggi, 2011. "Accounting for WTP/WTA discrepancy in discrete choice models: Discussion of policy implications based on two freight transport stated choice experiments," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 1103, USI Università della Svizzera italiana.
    • Handle: RePEc:lug:wpaper:1103
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    References listed on IDEAS

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    1. Ben-Akiva, M. & Bolduc, D. & Bradley, M., 1993. "Estimation of Travel Choice Models with Randomly Distributed Values of Time," Papers 9303, Laval - Recherche en Energie.
    2. De Borger, Bruno & Fosgerau, Mogens, 2008. "The trade-off between money and travel time: A test of the theory of reference-dependent preferences," Journal of Urban Economics, Elsevier, vol. 64(1), pages 101-115, July.
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    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General

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