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

Riccardo Scarpa (), Mara Thiene and Kenneth Train ()

American Journal of Agricultural Economics, 2008, vol. 90, issue 4, pages 994-1010

Abstract: We compare two approaches for estimating the distribution of consumers' willingness to pay ("WTP") in discrete choice models. The usual procedure is to estimate the distribution of the utility coefficients and then derive the distribution of "WTP", which is the ratio of coefficients. The alternative is to estimate the distribution of "WTP" directly. We apply both approaches to data on site choice in the Alps. We find that the alternative approach fits the data better, reduces the incidence of exceedingly large estimated "WTP" values, and provides the analyst with greater control in specifying and testing the distribution of "WTP". Copyright Copyright 2008 Agricultural and Applied Economics Association.

Date: 2008
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