nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2014‒05‒24
eleven papers chosen by
Edoardo Marcucci
Universita' di Roma Tre

  1. Willingness-to-Pay for Alternative Fuel Vehicle Characteristics: A Stated Choice Study for Germany By Hackbarth, André; Madlener, Reinhard
  2. Willingness of north Australian pastoralists and graziers to participate in contractual biodiversity conservation By Greiner, Romy
  3. The Public's Preference for Green Power in Australia By Ma, Chunbo; Burton, Michael
  4. Incorporating cultural values and preferences in wetland valuation and policy By MAYULA CHAIKUMBUNG; HELEN SCARBOROUGH; CHRIS DOUCOULIAGOS
  5. Attribute selection and variation in a choice modelling experiment By Windle, Jill; Rolfe, John
  6. Valuation framing and attribute scope variation in a choice experiment to asses the impacts of changing land use from agriculture to mining By Windle, Jill; Rolfe, John
  7. Elicitation formats and the WTA/WTP gap: A study of climate neutral foods By Andreas C. Drichoutis; Jayson L. Lusk; Valentina Pappa
  8. Hunting for optimality: preferences for Sika deer hunting experiences By Kerr, Geoffrey N.; Abell, Walt
  9. Ranking distributions of monotone attributes By Carmen Herrero; Antonio Villar
  10. Modelling financial satisfaction across life stages: a latent class approach By Sarah Brown; Robert Durand; Mark N Harris; Timothy Weterings
  11. Contingent Valuation: A Comparison of Referendum and Voluntary Contribution Mechanisms By Johnston, Marie

  1. By: Hackbarth, André (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: In the light of European energy efficiency and clean air legislations, as well as an ambitious electric mobility goal of the German government, we examine consumer preferences for alternative fuel vehicles (AFVs), based on a Germany-wide discrete choice experiment among 711 potential car buyers. We estimate consumers’ willingness-to-pay (WTP) and contingent variation (CV) for improvements in vehicle purchase price, fuel cost, driving range, refueling infrastructure, CO2 emissions and governmental monetary and non-monetary incentives, hereby accounting for diminishing marginal returns for some of the attributes and taking taste differences in the population into account by applying a latent class model with 6 distinct consumer segments. Our results indicate that almost 36% of the consumers are open-minded towards at least one AFV option, with 15% being AFV-affine insomuch that they show a high probability of choosing AFVs despite their current shortcomings. Our results suggest that German car buyers’ WTP for improvements of the various vehicle attributes varies considerably across consumer segments and that the vehicle features have to meet some minimum requirements so that AFVs are shortlisted. Furthermore, the CV values show that decision-makers in the administration and industry should focus on the most promising consumer group of ‘AFV aficionados’ and their needs, that some vehicle attribute improvements could increase AFV demand rather cost-effectively, and that consumers would accept surcharges for some vehicle attributes at a level, which could enable their economic provision and operation (e.g. fast-charging infrastructure), while others might need governmental subsidies to substitute the insufficient consumer WTP (e.g. battery capacity).
    Keywords: Discrete choice; Stated preferences; Latent class model; Alternative fuel vehicles; Germany; Electric mobility; Willingness-to-pay; Contingent variation
    JEL: C25 D12 M38 Q58 R48
    Date: 2013–12
  2. By: Greiner, Romy
    Abstract: This paper reports results from a choice experiment conducted with pastoralists and graziers across Australia’s tropical savannas in 2013 (n=104). The experiment is designed to inform the question under what conditions are north Australian pastoralists and graziers willing to sign up to voluntary on-farm biodiversity conservation contracts? Results are presented of random parameter logit models of best-worst responses and first preferences, revealing the importance of and trade-offs between contract attributes, and preference heterogeneity. An extended latent class model is also presented to further explore heterogeneity of respondents’ preferences further. Discussion of the results in the context of the international literature is provided and policy implications are proposed.
    Keywords: Choice experiment, response format, efficient design, willingness to accept, farmers, on-farm biodiversity conservation, Agricultural and Food Policy, Farm Management,
    Date: 2014
  3. By: Ma, Chunbo; Burton, Michael
    Abstract: Green electricity products are increasingly made available to consumers in many countries in an effort to address a number of environmental and social concerns. Most of the existing literature on this green electricity market focuses on consumer's characteristics and product attributes that could affect participation. However, the contribution of this environmental consumerism to the overall environmental good does not depend on participation alone. The real impact made relies on market penetration for green consumers (the proportion of green consumers) combined with the level of green consumption intensity-the commitment levels, or proportion of consumption that is green. We design an online interface that closely mimics the real market environment for electricity consumers in Western Australia and use an error component model to analyze consumers' choice of green electricity products is much more strongly influenced by consumer characteristics than product attributes. When green products are selected, the vast majority select the minimum commitment possible, and this is insensitive to the premium being charged on green power, suggesting that we are largely observing a "warm glow" for carbon mitigation.
    Keywords: Green Electricity, Choice Modeling, Error Components Model, Warm Glow, Environmental Economics and Policy, Resource /Energy Economics and Policy, D11, Q42, Q51,
    Date: 2014
    Abstract: This paper reports the findings of a choice modelling study designed to estimate the willingness-to-pay (WTP) for improvement of the ecosystem services of Bung Khong Long wetland in Thailand. The findings indicate that the cultural values associated with the wetland are significant suggesting that incorporating culture preferences may be a key factor in supporting wetland conservation. Attitudinal characteristics of respondents are important factors influencing WTP, implying community preferences are important in the effectiveness of environmental conservation efforts for this community.
    Keywords: Wetland valuation, Cultural values, Choice modelling
    Date: 2014–04–15
  5. By: Windle, Jill; Rolfe, John
    Keywords: Community/Rural/Urban Development, Land Economics/Use,
    Date: 2014
  6. By: Windle, Jill; Rolfe, John
    Abstract: Evaluating land use change in economic frameworks often requires non-market values to be assessed. However non-market valuation experiments can be sensitive to the way the trade offs are framed. The aim of the research reported in this paper was to examine the influence of varying the valuation scope and combination of attributes in a split sample choice experiment focused on assessing the impacts of increased mining activity (coal and coal seam gas) in the Surat Basin in southern Queensland, Australia. The region had traditionally been dominated by the agricultural sector. The survey was designed to assess the largely, but not exclusively, non-use values of a distant population (Brisbane (capital city) residents) for tradeoffs between positive and negative impacts, which incorporated economic, social and environmental issues. Four impact attributes were identified: A)local jobs in the mining sector; B) house prices in the non-mining sector; C) wage rates in the non-mining sector and, D) inspections and independent monitoring activity at coal seam gas mining sites (a proxy to address environmental concerns). The results indicate that varying the combination of attributes had a significant influence on preferences and welfare estimates, which varied across attributes and valuation formats,
    Keywords: Choice experiment, valuation scope, choice attributes, mining, impact assessment, Community/Rural/Urban Development, Land Economics/Use,
    Date: 2014
  7. By: Andreas C. Drichoutis (Department of Agricultural Economics,, Agricultural University of Athens); Jayson L. Lusk (Department of Agricultural Economics, Oklahoma State University); Valentina Pappa (Department of Economics, University of Ioannina)
    Abstract: We conduct a field valuation experiment where we vary the valuation method (contingent valuation vs. inferred valuation) as well as the payment format (dichotomous choice vs. payment card). Willingness-to-accept and willingness-to-pay valuations are elicited in a within-subjects design for foods with climate neutral labels. We find a similar gap for valuations elicited with the contingent or the inferred valuation method. However, we also find that the gap can be muted by using a payment card elicitation format.
    Keywords: willingness to pay; willingness to accept; contingent valuation; inferred valuation; payment card; single bounded
    JEL: D12 C93
    Date: 2014
  8. By: Kerr, Geoffrey N.; Abell, Walt
    Abstract: Introduced ungulate game animals are managed as pests on New Zealand public lands. Open access recreational hunting and commercial harvests have resulted in negative externalities as individuals and groups with competing interests have sought to maximise their own benefits. The revocation of pest status for these species in the Game Animal Council Act 2013 and the possibility of managing herds of special interest have brought into focus the lack of information on recreational hunter motivations, resource use, harvests and satisfactions. Recreational hunters were surveyed each month for a year about these matters, and participated in a choice experiment to identify characteristics of preferred hunts for Sika deer. The choice experiment used travel distance as the numeraire of value to overcome resistance to the commodification of recreational hunting, using an adaptive pivot design to address the wide variance in distances travelled. The study identified significant non-market benefits of recreational hunting. Hunters were highly heterogeneous, both in their hunting behaviours and preferences, which has important implications for management. Spatial and temporal separation of different types of hunters, as well as management of harvest and activity levels provide opportunities for significantly enhancing the value of recreational hunting.
    Keywords: Choice experiment, Sika deer, recreation, hunting, management, Environmental Economics and Policy,
    Date: 2014
  9. By: Carmen Herrero (Universidad de Alicante e IVIE); Antonio Villar (Department of Economics, Universidad Pablo de Olavide y European University Institute)
    Abstract: This paper refers to the ranking of densities that describe the distribution of an attribute in a given set of populations. The key elements of the problem are: (i) The distributions refer to ordered categorical data (e.g. health statuses, educational achievements, prestige positions, satisfaction levels); (ii) The evaluation of each distribution is relative to the others with which it is compared. We propose an evaluation method that is cardinal, complete and transitive, which based on the consistent application of the "willingness to pay" principle and the likelihood of getting better results when making a random extraction. A characterization of this method, in terms of simple properties, is provided.
    Keywords: Ranking distributions, categorical variables, willingness to pay, worth
    JEL: D00 D70 H00
    Date: 2014–05
  10. By: Sarah Brown (Department of Economics, University of Sheffield); Robert Durand (School of Economics and Finance, Curtin University); Mark N Harris (School of Economics and Finance, Curtin University); Timothy Weterings (Department of Econometrics and Business Statistics, Monash University, Australia)
    Abstract: We explore the determinants of financial satisfaction using a modelling framework which allows the drivers of financial satisfaction to vary across life stages. Given that financial satisfaction is measured as an ordered variable, our modelling approach is based on a latent class ordered probit model with an ordered probit class assignment function. Our analysis of household survey data indicates that four life stages are supported by the data. Our results suggest that such flexibility is important in understanding the drivers of financial satisfaction over the life cycle since there is a substantial amount of parameter heterogeneity across the four classes.
    Keywords: financial satisfaction, latent class, life cycle, ordered probit.
    JEL: C3 D1 D6
    Date: 2014–05
  11. By: Johnston, Marie
    Abstract: Contingent valuation methods (CVM) are integral in valuating non-market environmental issues. Numerous mechanisms have been proposed and analysed, as well as numerous studies on willingness to pay (WTP) and willingness to accept (WTA) discrepancies. Despite the concentrated and persistent focus on achieving efficient mechanisms, controversies and limitations remain. This paper applies an open-ended approach to the referendum (majority voting) method for contingent valuation as advised by Green et al. (1998). This is undertaken via economic experiments with induced values, and by comparison of two novel majority voting mechanisms and one widely accredited voluntary contribution mechanism. The preliminary findings show the majority voting mechanism induce more incentive compatible values and reduce WTP WTA discrepancy compared to the voluntary contribution method. Thus, given promising results, this paper recommends further investigation into the novel open-ended referendum method, termed the undisclosed cost voting mechanism (UCVM).
    Keywords: Willingness-To-Pay, Willingness-To-Accept, Provision Point Mechanism, Undisclosed Cost Voting Mechanism, Random Price Voting Mechanism, Environmental Economics and Policy, Research and Development/Tech Change/Emerging Technologies,
    Date: 2014

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