EconPapers    
Economics at your fingertips  
 

Biases in Willingness-To-Pay Measures from Multinomial Logit Estimates due to Unobserved Heterogeneity

Vincent van den Berg, Eric Kroes and Erik Verhoef ()
Additional contact information
Eric Kroes: VU University Amsterdam

No 10-014/3, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: It is a common finding in empirical discrete choice studies that the estimated mean relative values of the coefficients (i.e. WTP's) from multinomial logit (MNL) estimations differ from those calculated using mixed logit estimations, where the mixed logit has the better statistical fit. However, it is less clear under exactly what circumstances such differences arise, whether they are important, and if they can be seen as biases in the WTP estimates from MNL. We use datasets created by Monte Carlo simulation to test, in a controlled environment, the effects of the different possible sources of bias on the accuracy of WTP's estimated by MNL. Consistent with earlier research we find that random unobserved heterogeneity in the marginal utilities does not in itself biases the MNL estimates. Furthermore, whether or not the unobserved heterogeneity is symmetrically shaped also does not affect the accuracy of the WTP estimates of MNL. However, we find that if two heterogeneous marginal utilities are correlated then the WTP's from MNL may be biased. If the correlation between the marginal utilities is negative, then the bias in the MNL estimate is negative, whereas if the correlation is positive the bias is positive.

Keywords: Discrete Choice; Biases in WTP's; Multinomial Logit; Correlated Heterogeneous Marginal Utilities (search for similar items in EconPapers)
JEL-codes: C13 C25 (search for similar items in EconPapers)
Date: 2010-01-28
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
https://papers.tinbergen.nl/10014.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:tin:wpaper:20100014

Access Statistics for this paper

More papers in Tinbergen Institute Discussion Papers from Tinbergen Institute Contact information at EDIRC.
Bibliographic data for series maintained by Tinbergen Office +31 (0)10-4088900 ().

 
Page updated 2019-04-16
Handle: RePEc:tin:wpaper:20100014