Consumer welfare and unobserved heterogeneity in discrete choice models: The value of alpine road tunnels

Daniel Cerquera Dussán and Hannes Ullrich

No 10-095, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We investigate the sensitivity of consumer surplus estimates to parametric assumptions on individual preference heterogeneity in a discrete choice framework. We compare results from a parametric random coefficients logit model and a recently proposed nonparametric sieve estimator. In particular, we provide an assessment of the direct economic value of crossing the Alps for the European road freight sector. Using revealed preference data from a detailed survey on transalpine road freight traffic, we estimate the yearly cost of closing the Mont-Blanc Tunnel, which was closed for 3 years following a large accident in early 1999. Ultimately, our results permit the economic evaluation of security and transport policy measures affecting transalpine traffic. Our findings suggest that the way we model unobserved heterogeneity significantly affects our welfare results.

Keywords: Discrete Choice; Consumer Surplus; Nonparametric Estimation; Transalpine Freight (search for similar items in EconPapers)
JEL-codes: C14 C35 H54 L91 R41 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-dcm and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:10095

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