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Combining discrete and continuous representations of preference heterogeneity: a latent class approach

Angel Bujosa Bestard, Antoni Riera Font and Robert Hicks

No 2009/2, CRE Working Papers (Documents de treball del CRE) from Centre de Recerca Econòmica (UIB ·"Sa Nostra")

Abstract: This paper investigates heterogeneity in preferences for forest recreators in Mallorca, Spain. We develop a latent class approach combining discrete and continuous representations of tastes and compare it with the conventional latent class and random parameter logit approaches. We investigate the performance of the discrete-continuous model by comparing welfare estimates and predictive accuracy. The discrete-continuous model outperforms latent class and mixed logit approaches when comparing goodness-of-fit and in- sample site-choice forecasts. We find that the discrete-continuous model for preference heterogeneity reveals variation among individuals' preferences and WTP, and for some policy changes our results reveal striking differences in means and distributions of WTP.

Keywords: Travel Cost Method; latent class model; random parameter model; recreation demand; forests (search for similar items in EconPapers)
Pages: 22 pages
Date: 2009
New Economics Papers: this item is included in nep-dcm, nep-ecm, nep-mic and nep-upt
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Published in 'Documents de Treball CRE', 2009, pages 1-22

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Journal Article: Combining Discrete and Continuous Representations of Preference Heterogeneity: A Latent Class Approach (2010) Downloads
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