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Combining discrete and continuous representations of preference heterogeneity: a latent class approach

  • Angel Bujosa Bestard

    ()

    (Centre de Recerca Econòmica (UIB · Sa Nostra))

  • Antoni Riera Font

    ()

    (Centre de Recerca Econòmica (UIB · Sa Nostra))

  • Robert L. Hicks

    ()

    (The College of William and Mary)

This paper investigates heterogeneity in preferences for forest recreators in Mallorca, Spain. We develop a latent class approach combining discrete and continuous representations of tastes and compare it with the conventional latent class and random parameter logit approaches. We investigate the performance of the discrete-continuous model by comparing welfare estimates and predictive accuracy. The discrete-continuous model outperforms latent class and mixed logit approaches when comparing goodness-of-fit and in- sample site-choice forecasts. We find that the discrete-continuous model for preference heterogeneity reveals variation among individuals' preferences and WTP, and for some policy changes our results reveal striking differences in means and distributions of WTP.

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Paper provided by Centre de Recerca Econòmica (UIB ·"Sa Nostra") in its series CRE Working Papers (Documents de treball del CRE) with number 2009/2.

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Length: 22 pages
Date of creation: 2009
Date of revision:
Publication status: Published in 'Documents de Treball CRE', 2009, pages 1-22
Handle: RePEc:pdm:wpaper:2009/2
Contact details of provider: Web page: http://www.cre.sanostra.es

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