IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Accounting for uncertainty in willingness to pay for environmental benefits

  • Daziano, Ricardo A.
  • Achtnicht, Martin

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://econstor.eu/bitstream/10419/80722/1/766736679.pdf
Download Restriction: no

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 13-059.

as
in new window

Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:zbw:zewdip:13059
Contact details of provider: Postal: L 7,1; D - 68161 Mannheim
Phone: +49/621/1235-01
Fax: +49/621/1235-224
Web page: http://www.zew.de/
Email:


More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. Brownstone, David, 2001. "Discrete Choice Modeling for Transportation," University of California Transportation Center, Working Papers qt29v7d1pk, University of California Transportation Center.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. 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).
  13. Kenneth E. Train, 1998. "Recreation Demand Models with Taste Differences over People," Land Economics, University of Wisconsin Press, vol. 74(2), pages 230-239.
  14. 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.
  15. 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.
  16. 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.
  17. Train, Kenneth, 1985. "Discount rates in consumers' energy-related decisions: A review of the literature," Energy, Elsevier, vol. 10(12), pages 1243-1253.
  18. 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.
  19. 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.
  20. 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.
  21. 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.
  22. 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.
  23. 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.
  24. 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.
  25. 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.
  26. McFadden, Daniel L., 2000. "Economic Choices," Nobel Prize in Economics documents 2000-6, Nobel Prize Committee.
  27. 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.
  28. 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.
  29. 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.
  30. 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).
  31. 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.
  32. David Hensher & William Greene, 2003. "The Mixed Logit model: The state of practice," Transportation, Springer, vol. 30(2), pages 133-176, May.
  33. 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.
  34. 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.
  35. 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.
  36. 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.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.