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Selecting random parameters in discrete choice experiment for environmental valuation: A simulation experiment

Petr Mariel, Amaya De Ayala Bilbao, David Hoyos () and Sabah Abdullah

No 2010-09, BILTOKI from Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística)

Abstract: This paper examines the various tests commonly used to select random parameters in choice modelling. The most common procedures for selecting random parameters are: the Lagrange Multiplier test as proposed by McFadden and Train (2000), the t-statistic of the deviation of the random parameter and the log-likelihood ratio test. The identification of random parameters in other words the recognition of preference heterogeneity among population is based on the fact that an individual makes a choice depending on her/his: tastes, perceptions and experiences. A simulation experiment was carried out based on a real choice experiment and the results indicated that the power of these three tests depends importantly on the spread and type of the tested parameter distribution.

Keywords: choice experiment; preference heterogeneity; random parameter logit; simulation; tests for selecting random parameters (search for similar items in EconPapers)
JEL-codes: Q51 (search for similar items in EconPapers)
Date: 2010
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Journal Article: Selecting random parameters in discrete choice experiment for environmental valuation: A simulation experiment (2013) Downloads
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Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain

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