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Utility in WTP Space: A Tool to Address Confounding Random Scale Effects in Destination Choice to the Alps

Author

Listed:
  • Ricardo Scarpa

    () (University of Waikato)

  • Mara Thiene

    () (University of Padua Viale dell’Universita`)

  • Kenneth Train

    () (University of California at Berkeley)

Abstract

Destination choice models with individual-specific taste variation have become the presumptive analytical approach in applied nonmarket valuation. Under the usual specification, tastes are represented by coefficients of site attributes that enter utility, and the distribution of these coefficients is estimated. The distribution of willingness-to-pay (WTP) for site attributes is then derived from the estimated distribution of coefficients. Though conceptually appealing this procedure often results in untenable distributions of willingness to pay. An alternative procedure is to estimate the distribution of willingness to pay directly, through a re-parameterization of the model. We compare hierarchical Bayes and maximum simulated likelihood estimates under both approaches, using data on site choice in the Alps. We find that models parameterized in terms of WTP provide more reasonable estimates for the distribution of WTP, and also fit the data better than models parameterized in terms of attribute coefficients. This approach to parameterizing utility is hence deemed promising for applied nonmarket valuation.

Suggested Citation

  • Ricardo Scarpa & Mara Thiene & Kenneth Train, 2006. "Utility in WTP Space: A Tool to Address Confounding Random Scale Effects in Destination Choice to the Alps," Working Papers in Economics 06/15, University of Waikato.
  • Handle: RePEc:wai:econwp:06/15
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    References listed on IDEAS

    as
    1. Riccardo Scarpa & Mara Thiene, 2004. "Destination Choice Models for Rock Climbing in the Northeast Alps: A Latent-Class Approach Based on Intensity of Participation," Working Papers 2004.131, Fondazione Eni Enrico Mattei.
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    6. Andrew A. Goett & Kathleen Hudson & Kenneth E. Train, 2000. "Customers' Choice Among Retail Energy Suppliers: The Willingness-to-Pay for Service Attributes," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 1-28.
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    Citations

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    Cited by:

    1. Scarpa Riccardo & Thiene Mara & Marangon Francesco, 2007. "The Value of Collective Reputation for Environmentally-Friendly Production Methods: The Case of Val di Gresta," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 5(1), pages 1-28, September.
    2. Bart Vermeulen & Peter Goos & Riccardo Scarpa & Martina Vandebroek, 2011. "Bayesian Conjoint Choice Designs for Measuring Willingness to Pay," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 48(1), pages 129-149, January.
    3. Doherty, Edel & Campbell, Danny & Hynes, Stephen & van Rensburg, Tom M., 2011. "The effect of using labelled alternatives in stated choice experiments: an exploration focusing on farmland walking trails in Ireland," 85th Annual Conference, April 18-20, 2011, Warwick University, Coventry, UK 108792, Agricultural Economics Society.
    4. Doherty, Edel & Campbell, Danny & Hynes, Stephen & van Rensburg, Thomas, 2012. "Labelling effects in discrete choice experiments," Working Papers 148831, Socio-Economic Marine Research Unit, National University of Ireland, Galway.
    5. Beharry-Borg, Nesha & Scarpa, Riccardo, 2010. "Valuing quality changes in Caribbean coastal waters for heterogeneous beach visitors," Ecological Economics, Elsevier, vol. 69(5), pages 1124-1139, March.
    6. Tagliafierro, C. & Boeri, M. & Longo, A. & Hutchinson, W.G., 2016. "Stated preference methods and landscape ecology indicators: An example of transdisciplinarity in landscape economic valuation," Ecological Economics, Elsevier, vol. 127(C), pages 11-22.
    7. Mara Thiene & Marco Boeri & Caspar Chorus, 2012. "Random Regret Minimization: Exploration of a New Choice Model for Environmental and Resource Economics," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(3), pages 413-429, March.
    8. Collins, Jill P. & Vossler, Christian A., 2009. "Incentive compatibility tests of choice experiment value elicitation questions," Journal of Environmental Economics and Management, Elsevier, vol. 58(2), pages 226-235, September.
    9. Patil, Sunil & Burris, Mark & Douglass Shaw, W., 2011. "Travel using managed lanes: An application of a stated choice model for Houston, Texas," Transport Policy, Elsevier, vol. 18(4), pages 595-603, August.
    10. Mara Thiene & Riccardo Scarpa, 2009. "Deriving and Testing Efficient Estimates of WTP Distributions in Destination Choice Models," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 44(3), pages 379-395, November.

    More about this item

    Keywords

    mixed logit random utility parameters; random willingness to pay; travel cost method; destination choice modeling;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • Q26 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Recreational Aspects of Natural Resources

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