Utility in WTP Space: A Tool to Address Confounding Random Scale Effects in Destination Choice to the Alps

Riccardo Scarpa, Mara Thiene (mara.thiene@unipd.it) and Kenneth Train (train@econ.berkeley.edu)

Working Papers in Economics from University of Waikato

Abstract: Destination choice models with individual-specific taste variation have become the presumptive analytical approach in applied nonmarket valuation. Under the usual specification, tastes are represented by coefficients of site attributes that enter utility, and the distribution of these coefficients is estimated. The distribution of willingness-to-pay (WTP) for site attributes is then derived from the estimated distribution of coefficients. Though conceptually appealing this procedure often results in untenable distributions of willingness to pay. An alternative procedure is to estimate the distribution of willingness to pay directly, through a re-parameterization of the model. We compare hierarchical Bayes and maximum simulated likelihood estimates under both approaches, using data on site choice in the Alps. We find that models parameterized in terms of WTP provide more reasonable estimates for the distribution of WTP, and also fit the data better than models parameterized in terms of attribute coefficients. This approach to parameterizing utility is hence deemed promising for applied nonmarket valuation.

Keywords: mixed logit random utility parameters; random willingness to pay; travel cost method; destination choice modeling (search for similar items in EconPapers)
JEL-codes: C15 C25 Q26 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2006-12-15
New Economics Papers: this item is included in nep-agr, nep-cul, nep-dcm, nep-tur and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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