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Addressing Attribute Value Substitution in Discrete Choice Experiments to Avoid Unintended Consequences

Author

Listed:
  • Gregory Howard

    (East Carolina University)

  • Brian E. Roe

    (Ohio State University)

  • Matthew G. Interis

    (Mississippi State University)

  • Jay Martin

    (Ohio State University)

Abstract

Choice experiments are a popular method of generating stated preference data for a variety of fields from marketing to health, transportation and environmental economics. They allow researchers to systematically vary choice attributes in a manner that can both increase estimation efficiency and allay endogeneity concerns. An increasing number of studies have included elicited subjective beliefs in their stated preference models. We discuss why this strategy may be warranted in some cases, specifically when the researcher suspects subjects will engage in attribute value substitution or scenario adjustment. While there are multiple ways one could integrate subjective beliefs, in all cases a proper understanding of the econometric ramifications of their inclusion is necessary. We show that excluding subjective beliefs yields biased parameter estimates yet policy-relevant welfare measures, whereas including subjective beliefs yields unbiased parameter estimates but can generate less policy-relevant welfare estimates. We demonstrate how policy-relevant welfare measures should be calculated from models that include subjective beliefs and illustrate our theory with an application to payment for ecosystem services to farmers.

Suggested Citation

  • Gregory Howard & Brian E. Roe & Matthew G. Interis & Jay Martin, 2020. "Addressing Attribute Value Substitution in Discrete Choice Experiments to Avoid Unintended Consequences," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(4), pages 813-838, December.
    • Handle: RePEc:kap:enreec:v:77:y:2020:i:4:d:10.1007_s10640-020-00519-9
    DOI: 10.1007/s10640-020-00519-9
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    5. Shr, Yau-Huo Jimmy & Zhang, Wendong, 2021. "Does Omitting Downstream Water Quality Change the Economic Benefits of Nutrient Reduction Programs: Evidence from a Discrete Choice Experiment," 2021 Annual Meeting, August 1-3, Austin, Texas 313927, Agricultural and Applied Economics Association.

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