IDEAS home Printed from https://ideas.repec.org/p/mcm/deptwp/2001-02.html
   My bibliography  Save this paper

Inferring Willingness-to-Pay for Health Attributes of Air Quality Using Information on ranking of Alternatives and Cognitive Ability of Respondents

Author

Listed:
  • R.A. Muller
  • A.L. Robb
  • A. Diener

Abstract

We investigate the use of variable scale parameters to account for heterogeneity in responses to a stated preference survey of willingness to pay for air quality. The survey instrument collected full rankings of four alternatives in each of nine choice sets. Nine of 54 pairwise comparisons involved dominated alternatives; selection of a dominated alternative is interpreted as indicating cognitive difficulties. We allow the scale parameter in a conditional logit model to vary by the ranking considered (first, second or third choice) and by the degree of cognitive difficulty encountered. We investigate the effect of this on the magnitude and precision of estimated willingness-to-pay using empirically-based confidence intervals. The size of the scale parameter is significantly and positively related to the frequency with which respondents chose dominated choices, even after corrections designed to eliminate endogeneity bias. Ignoring heterogeneity in the cognitive ability of respondents biases willingness-to-pay estimates upwards. Consideration of second and third choices narrows the confidence intervals on WTP estimates. Introducing a variable scale parameter related to ranking by itself does not improve the precision of the estimate. Sample STATA code is provided.

Suggested Citation

  • R.A. Muller & A.L. Robb & A. Diener, 2001. "Inferring Willingness-to-Pay for Health Attributes of Air Quality Using Information on ranking of Alternatives and Cognitive Ability of Respondents," Department of Economics Working Papers 2001-02, McMaster University.
  • Handle: RePEc:mcm:deptwp:2001-02
    as

    Download full text from publisher

    File URL: http://socserv.mcmaster.ca/econ/rsrch/papers/archive/2001-02.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Hensher, David & Louviere, Jordan & Swait, Joffre, 1998. "Combining sources of preference data," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 197-221, November.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • Q26 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Recreational Aspects of Natural Resources

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:mcm:deptwp:2001-02. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/demcmca.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.