A NOTE ON NONLINEARITY BIAS AND DICHOTOMOUS CHOICE CVM: IMPLICATIONS FOR AGGREGATE BENEFITS ESTIMATION

Ray A. Souter and James Michael Bowker

Agricultural and Resource Economics Review, 1996, vol. 25, issue 01, 6

Abstract: It is a generally known statistical fact that the mean of a nonlinear function of a set of random variables is not equivalent to the function evaluated at the means of the variables. However, in dichotomous choice contingent valuation studies a common practice is to calculate an overall mean (or median) by integrating over offer space (numerically or analytically) an estimated logit or probit function in which sample mean values for the concomitant variables are used. We demonstrate this procedure to be incorrect and we statically test the procedure against the correct method for nonlinear models. Using data resulting in a well-behaved logit model, we reject the hypothesis of congruence between the two means. Such a finding should be considered in future single response dichotomous choice CVM studies, particularly when aggregation is of interest.

Keywords: Research; Methods/Statistical; Methods (search for similar items in EconPapers)
Date: 1996
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://ageconsearch.umn.edu/record/31649/files/25010054.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:arerjl:31649

DOI: 10.22004/ag.econ.31649

Access Statistics for this article

More articles in Agricultural and Resource Economics Review from Northeastern Agricultural and Resource Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().