Cost thresholds, cut-offs and sensitivities in stated choice analysis: Identification and implications

Danny Campbell (), David Hensher and Riccardo Scarpa

Resource and Energy Economics, 2012, vol. 34, issue 3, 396-411

Abstract: Within the discrete choice literature, there is growing recognition that some respondents do not process all attributes when evaluating their choice outcomes. Worryingly, the cost attribute is often among those attributes that are likely to be ignored by respondents. We use probabilistic decision process models (similar in form to latent class models, but where we define the classes to describe specific heuristics) to facilitate situations where respondents adopt cost thresholds and cut-offs. We further develop this model to address the potential confounding between preference heterogeneity and processing heterogeneity by simultaneously allowing for a segmentation of respondents based on their sensitivities to cost. Results, based on an empirical dataset on the existence value of rare fish species in Ireland, provide further confirmation that a share of respondents did not attended to cost. Importantly, however, when heterogeneity to cost levels is accounted for the inferred incidence of complete non-attendance is markedly lower, to the extent that when cost thresholds and cut-offs are also accommodated it almost disappears. This modelling approach leads to significant gains in model fit and has important implications for welfare analysis.

Keywords: Discrete choice experiments; Willingness to pay; Attribute non-attendance (search for similar items in EconPapers)
JEL-codes: C25 Q51 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:34:y:2012:i:3:p:396-411

DOI: 10.1016/j.reseneeco.2012.04.001

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