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Latent Thresholds Analysis of Choice Data with Multiple Bids and Response Options


  • Mimako Kobayashi

    () (Department of Resource Economics, University of Nevada, Reno)

  • Klaus Moeltner

    () (Department of Resource Economics, University of Nevada, Reno)

  • Kimberly Rollins

    () (Department of Resource Economics, University of Nevada, Reno)


In many stated preference settings stakeholders will be uncertain as to their exact willingness-to-pay for a proposed environmental amenity. To accommodate this possibility analysts have designed elicitation formats with multiple bids and response options that allow for the expression of uncertainty. We argue that the information content flowing from such elicitation has not yet been fully and efficiently exploited in existing contributions. We introduce a Latent Thresholds Estimator that focuses on the simultaneous identification of the full set of thresholds that delineate an individual's value space in accordance with observed response categories. Our framework provides a more complete picture of the underlying value distribution, the marginal effects of regressors, and the impact of bid designs on estimation efficiency. We show that the common practice of re-coding responses to derive point estimate of willingness-to-pay leaves useful information untapped and can produce misleading results if thresholds are highly correlated.

Suggested Citation

  • Mimako Kobayashi & Klaus Moeltner & Kimberly Rollins, 2010. "Latent Thresholds Analysis of Choice Data with Multiple Bids and Response Options," Working Papers 10-001, University of Nevada, Reno, Department of Economics;University of Nevada, Reno , Department of Resource Economics.
  • Handle: RePEc:unr:wpaper:10-001

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    File Function: First version, 2010
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    References listed on IDEAS

    1. Akter, Sonia & Bennett, Jeff & Akhter, Sanzida, 2008. "Preference uncertainty in contingent valuation," Ecological Economics, Elsevier, vol. 67(3), pages 345-351, October.
    2. Akter, Sonia & Brouwer, Roy & Brander, Luke & van Beukering, Pieter, 2009. "Respondent uncertainty in a contingent market for carbon offsets," Ecological Economics, Elsevier, vol. 68(6), pages 1858-1863, April.
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    More about this item


    Stated Preference; Multiple Bounded Elicitation; Polychotomous Choice; Bayesian Estimation; Value Uncertainty;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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