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Bounding WTP distributions to reflect the ‘actual’ consideration set

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  • Campbell, Danny
  • Hensher, David A.
  • Scarpa, Riccardo

Abstract

In this paper we extend the independent availability logit and combined latent class mixed logit models to accommodate respondents with different consideration sets due to their cost thresholds and cut-offs. Pertinent features of our model are that it is estimated in WTP-space and that the class-specific WTP distributions are truncated to be within the bounds deduced from the cost level(s) within each class-specific consideration set. Our analysis shows that our approach is well suited at uncovering the heterogeneity in the cost thresholds and cut-offs used by respondents. This is shown to help build a richer insight into respondent׳s behaviour as well as raise a number of concerns about the appropriateness of assuming deterministic choice sets. We discuss the implications of our results for welfare analysis.

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  • Campbell, Danny & Hensher, David A. & Scarpa, Riccardo, 2014. "Bounding WTP distributions to reflect the ‘actual’ consideration set," Journal of choice modelling, Elsevier, vol. 11(C), pages 4-15.
    • Handle: RePEc:eee:eejocm:v:11:y:2014:i:c:p:4-15
    DOI: 10.1016/j.jocm.2014.02.004
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    References listed on IDEAS

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    14. David A. Hensher & John M. Rose, 2012. "The Influence of Alternative Acceptability, Attribute Thresholds and Choice Response Certainty on Automobile Purchase Preferences," Journal of Transport Economics and Policy, University of Bath, vol. 46(3), pages 451-468, September.
    15. Angel Bujosa & Antoni Riera & Robert Hicks, 2010. "Combining Discrete and Continuous Representations of Preference Heterogeneity: A Latent Class Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 47(4), pages 477-493, December.
    16. Roger H. von Haefen & D. Matthew Massey & Wiktor L. Adamowicz, 2005. "Serial Nonparticipation in Repeated Discrete Choice Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 1061-1076.
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    18. Campbell, Danny & Hensher, David A. & Scarpa, Riccardo, 2012. "Cost thresholds, cut-offs and sensitivities in stated choice analysis: Identification and implications," Resource and Energy Economics, Elsevier, vol. 34(3), pages 396-411.
    19. Riccardo Scarpa & Mara Thiene & Kenneth Train, 2008. "Utility in Willingness to Pay Space: A Tool to Address Confounding Random Scale Effects in Destination Choice to the Alps," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 994-1010.
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    23. David Hensher & Andrew Collins & William Greene, 2013. "Accounting for attribute non-attendance and common-metric aggregation in a probabilistic decision process mixed multinomial logit model: a warning on potential confounding," Transportation, Springer, vol. 40(5), pages 1003-1020, September.
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    Cited by:

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    2. Karlõševa, Aljona & Nõmmann, Sulev & Nõmmann, Tea & Urbel-Piirsalu, Evelin & Budziński, Wiktor & Czajkowski, Mikołaj & Hanley, Nick, 2016. "Marine trade-offs: Comparing the benefits of off-shore wind farms and marine protected areas," Energy Economics, Elsevier, vol. 55(C), pages 127-134.
    3. Franceschinis, Cristiano & Thiene, Mara & Scarpa, Riccardo & Rose, John & Moretto, Michele & Cavalli, Raffaele, 2017. "Adoption of renewable heating systems: An empirical test of the diffusion of innovation theory," Energy, Elsevier, vol. 125(C), pages 313-326.
    4. D. Fang & R. M. Nayga & H. A. Snell & G. H. West & C. Bazzani, 2019. "Evaluating USA’s New Nutrition and Supplement Facts Label: Evidence from a Non-hypothetical Choice Experiment," Journal of Consumer Policy, Springer, vol. 42(4), pages 545-562, December.
    5. Sandorf, Erlend Dancke & Campbell, Danny & Hanley, Nick, 2017. "Disentangling the influence of knowledge on attribute non-attendance," Journal of choice modelling, Elsevier, vol. 24(C), pages 36-50.
    6. Marije Schaafsma & Roy Brouwer, 2020. "Substitution Effects in Spatial Discrete Choice Experiments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(2), pages 323-349, February.
    7. Merk, Christine & Rehdanz, Katrin & Schmidt, Ulrich & Schröder, Carsten, 2015. "Violations of scale compatibility: results from pricing tasks and choice tasks in choice experiments," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113023, Verein für Socialpolitik / German Economic Association.
    8. Alberto Longo & Danny Campbell, 2017. "The Determinants of Brownfields Redevelopment in England," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(2), pages 261-283, June.
    9. Erlend Dancke Sandorf & Danny Campbell, 2019. "Accommodating satisficing behaviour in stated choice experiments," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 46(1), pages 133-162.
    10. Broberg, Thomas & Daniel, Aemiro Melkamu & Persson, Lars, 2021. "Household preferences for load restrictions: Is there an effect of pro-environmental framing?," Energy Economics, Elsevier, vol. 97(C).
    11. Thiene, Mara & Scarpa, Riccardo & Longo, Alberto & Hutchinson, William George, 2018. "Types of front of pack food labels: Do obese consumers care? Evidence from Northern Ireland," Food Policy, Elsevier, vol. 80(C), pages 84-102.
    12. Balbontin, Camila & Hensher, David A. & Collins, Andrew T., 2019. "How to better represent preferences in choice models: The contributions to preference heterogeneity attributable to the presence of process heterogeneity," Transportation Research Part B: Methodological, Elsevier, vol. 122(C), pages 218-248.
    13. Balbontin, Camila & Hensher, David A. & Collins, Andrew T., 2017. "Integrating attribute non-attendance and value learning with risk attitudes and perceptual conditioning," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 97(C), pages 172-191.
    14. Edenbrandt, Anna Kristina & Lagerkvist, Carl-Johan & Lüken, Malte & Orquin, Jacob L., 2022. "Seen but not considered? Awareness and consideration in choice analysis," Journal of choice modelling, Elsevier, vol. 45(C).
    15. Erdem, Seda & Campbell, Danny & Thompson, Carl, 2014. "Elimination and selection by aspects in health choice experiments: Prioritising health service innovations," Journal of Health Economics, Elsevier, vol. 38(C), pages 10-22.
    16. Daniel, Aemiro Melkamu, 2020. "Towards Sustainable Energy Consumption Electricity Demand Flexibility and Household Fuel Choice," Umeå Economic Studies 971, Umeå University, Department of Economics.
    17. Danny Campbell & Seda Erdem, 2015. "Position Bias in Best-worst Scaling Surveys: A Case Study on Trust in Institutions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(2), pages 526-545.
    18. Erdem, Seda & Campbell, Danny & Thompson, Carl, 2014. "Addressing elimination and selection by aspects decision rules in discrete choice experiments: does it matter?," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169839, Agricultural and Applied Economics Association.
    19. Contu, Davide & Strazzera, Elisabetta, 2022. "Testing for saliency-led choice behavior in discrete choice modeling: An application in the context of preferences towards nuclear energy in Italy," Journal of choice modelling, Elsevier, vol. 44(C).
    20. Börger, Tobias & Ngoc, Quach Thi Khanh & Kuhfuss, Laure & Hien, Tang Thi & Hanley, Nick & Campbell, Danny, 2021. "Preferences for coastal and marine conservation in Vietnam: Accounting for differences in individual choice set formation," Ecological Economics, Elsevier, vol. 180(C).
    21. Campbell, Danny & Boeri, Marco & Doherty, Edel & George Hutchinson, W., 2015. "Learning, fatigue and preference formation in discrete choice experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 345-363.
    22. Sandorf, Erlend Dancke & Crastes dit Sourd, Romain & Mahieu, Pierre-Alexandre, 2018. "The effect of attribute-alternative matrix displays on preferences and processing strategies," Journal of choice modelling, Elsevier, vol. 29(C), pages 113-132.
    23. Gustafson, Christopher R., 2023. "Comparing the impact of subsidies and health prompts on choice process variables and food choice: The case of dietary fiber," OSF Preprints u4v5c, Center for Open Science.

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