Accounting for uncertainty in willingness to pay for environmental benefits
Previous literature on the distribution of willingness to pay has focused on its heterogeneity distribution without addressing exact interval estimation. In this paper we derive and analyze Bayesian confidence sets for quantifying uncertainty in the determination of willingness to pay for carbon dioxide abatement. We use two empirical case studies: household decisions of energy-efficient heating versus insulation, and purchase decisions of ultralow-emission vehicles. We first show that deriving credible sets using the posterior distribution of the willingness to pay is straightforward in the case of deterministic consumer heterogeneity. However, when using individual estimates, which is the case for the random parameters of the mixed logit model, it is complex to define the distribution of interest for the interval estimation problem. This latter problem is actually more involved than determining the moments of the heterogeneity distribution of the willingness to pay using frequentist econometrics. A solution that we propose is to derive and then summarize the distribution of point estimates of the individual willingness to pay under different loss functions.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.zew.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kwak, So-Yoon & Yoo, Seung-Hoon & Kwak, Seung-Jun, 2010. "Valuing energy-saving measures in residential buildings: A choice experiment study," Energy Policy, Elsevier, vol. 38(1), pages 673-677, January.
- Jaffe, Adam B. & Stavins, Robert N., 1994. "The energy paradox and the diffusion of conservation technology," Resource and Energy Economics, Elsevier, vol. 16(2), pages 91-122, May.
- repec:dgr:rugsom:00f25 is not listed on IDEAS
- Boxall, Peter C. & Adamowicz, Wiktor L. & Swait, Joffre & Williams, Michael & Louviere, Jordan, 1996. "A comparison of stated preference methods for environmental valuation," Ecological Economics, Elsevier, vol. 18(3), pages 243-253, September.
- Achtnicht, Martin, 2012.
"German car buyers' willingness to pay to reduce CO2 emissions,"
ZEW Discussion Papers
09-058 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Martin Achtnicht, 2012. "German car buyers’ willingness to pay to reduce CO 2 emissions," Climatic Change, Springer, vol. 113(3), pages 679-697, August.
- Achtnicht, Martin, 2009. "German car buyers' willingness to pay to reduce CO2 emissions," ZEW Discussion Papers 09-058, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Erik Meijer & Jan Rouwendal, 2006.
"Measuring welfare effects in models with random coefficients,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 21(2), pages 227-244.
- Meijer, E. & Rouwendal, J., 2000. "Measuring welfare effects in models with random coefficients," Research Report 00F25, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
- Achtnicht, Martin, 2011. "Do environmental benefits matter? Evidence from a choice experiment among house owners in Germany," Ecological Economics, Elsevier, vol. 70(11), pages 2191-2200, September.
- David Revelt & Kenneth Train, 1998. "Mixed Logit With Repeated Choices: Households' Choices Of Appliance Efficiency Level," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 647-657, November.
- Banfi, Silvia & Farsi, Mehdi & Filippini, Massimo & Jakob, Martin, 2008.
"Willingness to pay for energy-saving measures in residential buildings,"
Elsevier, vol. 30(2), pages 503-516, March.
- Silvia Banfi & Mehdi Farsi & Massimo Filippini & Martin Jakob, 2005. "Willingness to Pay for Energy-Saving Measures in Residential Buildings," CEPE Working paper series 05-41, CEPE Center for Energy Policy and Economics, ETH Zurich.
- von Haefen, Roger H., 2000.
"Incorporating Observed Choice In The Construction Of Welfare Measures From Random Utility Models,"
2000 Annual meeting, July 30-August 2, Tampa, FL
21836, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- von Haefen, Roger H., 2003. "Incorporating observed choice into the construction of welfare measures from random utility models," Journal of Environmental Economics and Management, Elsevier, vol. 45(2), pages 145-165, March.
- David Hensher & William Greene, 2003. "The Mixed Logit model: The state of practice," Transportation, Springer, vol. 30(2), pages 133-176, May.
- Krinsky, Itzhak & Robb, A Leslie, 1986. "On Approximating the Statistical Properties of Elasticities," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 715-19, November.
- Ariel Pakes, 2002.
"A Reconsideration of Hedonic Price Indices with an Application to PC's,"
NBER Working Papers
8715, National Bureau of Economic Research, Inc.
- Ariel Pakes, 2003. "A Reconsideration of Hedonic Price Indexes with an Application to PC's," American Economic Review, American Economic Association, vol. 93(5), pages 1578-1596, December.
- Garrett Sonnier & Andrew Ainslie & Thomas Otter, 2007. "Heterogeneity distributions of willingness-to-pay in choice models," Quantitative Marketing and Economics, Springer, vol. 5(3), pages 313-331, September.
- Bolduc, Denis & Khalaf, Lynda & Yélou, Clément, 2010. "Identification robust confidence set methods for inference on parameter ratios with application to discrete choice models," Journal of Econometrics, Elsevier, vol. 157(2), pages 317-327, August.
- Greene, William H. & Hensher, David A., 2003. "A latent class model for discrete choice analysis: contrasts with mixed logit," Transportation Research Part B: Methodological, Elsevier, vol. 37(8), pages 681-698, September.
- Swait, Joffre & Bernardino, Adriana, 2000. "Distinguishing taste variation from error structure in discrete choice data," Transportation Research Part B: Methodological, Elsevier, vol. 34(1), pages 1-15, January.
- Murdock, Jennifer, 2006. "Handling unobserved site characteristics in random utility models of recreation demand," Journal of Environmental Economics and Management, Elsevier, vol. 51(1), pages 1-25, January.
- Brownstone, David, 2001. "Discrete Choice Modeling for Transportation," University of California Transportation Center, Working Papers qt29v7d1pk, University of California Transportation Center.
- Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 33-54, Spring.
- Jean-Marie Dufour, 1997. "Some Impossibility Theorems in Econometrics with Applications to Structural and Dynamic Models," Econometrica, Econometric Society, vol. 65(6), pages 1365-1388, November.
- Kenneth E. Train, 1998. "Recreation Demand Models with Taste Differences over People," Land Economics, University of Wisconsin Press, vol. 74(2), pages 230-239.
- Daniel McFadden, 2001.
American Economic Review,
American Economic Association, vol. 91(3), pages 351-378, June.
- Algers, Staffan & Bergström, Pål & Dahlberg, Matz & Lindqvist Dillén, Johanna, 1998.
"Mixed Logit Estimation of the Value of Travel Time,"
Working Paper Series
1998:15, Uppsala University, Department of Economics.
- Algers, S. & Bergstrom, P. & Dahlberg, M. & Dillen, J.L., 1998. "Mixed Logit Estimation of the Value of Travel Time," Papers 1998:15, Uppsala - Working Paper Series.
- 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.
- Hess, Stephane & Bierlaire, Michel & Polak, John W., 2005. "Estimation of value of travel-time savings using mixed logit models," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(2-3), pages 221-236.
- Daly, Andrew & Hess, Stephane & de Jong, Gerard, 2012. "Calculating errors for measures derived from choice modelling estimates," Transportation Research Part B: Methodological, Elsevier, vol. 46(2), pages 333-341.
- Mauricio Sillano & Juan de Dios Ort�zar, 2005. "Willingness-to-pay estimation with mixed logit models: some new evidence," Environment and Planning A, Pion Ltd, London, vol. 37(3), pages 525-550, March.
- Bliemer, Michiel C.J. & Rose, John M., 2013. "Confidence intervals of willingness-to-pay for random coefficient logit models," Transportation Research Part B: Methodological, Elsevier, vol. 58(C), pages 199-214.
- McCulloch, Robert E. & Polson, Nicholas G. & Rossi, Peter E., 2000. "A Bayesian analysis of the multinomial probit model with fully identified parameters," Journal of Econometrics, Elsevier, vol. 99(1), pages 173-193, November.
- Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
- McCulloch, Robert & Rossi, Peter E., 1994. "An exact likelihood analysis of the multinomial probit model," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 207-240.
- Scarpa, Riccardo & Willis, Ken, 2010. "Willingness-to-pay for renewable energy: Primary and discretionary choice of British households' for micro-generation technologies," Energy Economics, Elsevier, vol. 32(1), pages 129-136, January.
- Cirillo, C. & Axhausen, K.W., 2006. "Evidence on the distribution of values of travel time savings from a six-week diary," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(5), pages 444-457, June.
- Train, Kenneth, 1985. "Discount rates in consumers' energy-related decisions: A review of the literature," Energy, Elsevier, vol. 10(12), pages 1243-1253.
- Andrew Daly & Stephane Hess & Kenneth Train, 2012. "Assuring finite moments for willingness to pay in random coefficient models," Transportation, Springer, vol. 39(1), pages 19-31, January.
When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:13059. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.