Bayesian Estimation of Willingness-to-pay Where Respondents Mis-report Their Preferences

Kelvin George Balcombe, Alastair StJohn Bailey (), A. Chalak and Iain Fraser ()

Oxford Bulletin of Economics and Statistics, 2007, vol. 69, issue 3, pages 413-438

Abstract: We introduce a modified conditional logit model that takes account of uncertainty associated with mis-reporting in revealed preference experiments estimating willingness-to-pay (WTP). Like Hausman "et al". ["Journal of Econometrics" (1988) Vol. 87, pp. 239-269], our model captures the extent and direction of uncertainty by respondents. Using a Bayesian methodology, we apply our model to a choice modelling (CM) data set examining UK consumer preferences for non-pesticide food. We compare the results of our model with the Hausman model. WTP estimates are produced for different groups of consumers and we find that modified estimates of WTP, that take account of mis-reporting, are substantially revised downwards. We find a significant proportion of respondents mis-reporting in favour of the non-pesticide option. Finally, with this data set, Bayes factors suggest that our model is preferred to the Hausman model. Copyright 2007 Blackwell Publishing Ltd and the Department of Economics, University of Oxford.

Date: 2007

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