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Incorporating Discontinuous Preferences into the Analysis of Discrete Choice Experiments

Abstract

: Data from a discrete choice experiment on improvements of rural landscape attributes are used to investigate the implications of discontinuous preferences on willingness to pay estimates. Using a multinomial error component logit model, we explore differences in scale and unexplained variance between respondents with discontinuous and continuous preferences and condition taste intensities on whether or not each attribute was considered by the respondent during the evaluation of alternatives. Results suggest that significant improvements in model performance can be achieved when discontinuous preferences are accommodated in the econometric specification, and that the magnitude and robustness of the willingness to pay estimates are sensitive to discontinuous preferences.

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File URL: ftp://wms-webprod1.mngt.waikato.ac.nz/RePEc/wai/econwp/0718.pdf
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Paper provided by University of Waikato, Department of Economics in its series Working Papers in Economics with number 07/18.

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Length: 19 pages
Date of creation: 20 Sep 2007
Date of revision:
Handle: RePEc:wai:econwp:07/18
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Keywords: discontinuous preferences; heteroskedastic mixed logit; discrete choice experiments; multinomial error component logit model; rural landscape; willingness to pay;

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Find related papers by JEL classification:
  • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
  • 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
  • C99 - Mathematical and Quantitative Methods - - Design of Experiments - - - Other
  • Q26 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Recreational Aspects of Natural Resources

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