Utility in Willingness to Pay Space: A Tool to Address Confounding Random Scale Effects in Destination Choice to the Alps

Riccardo Scarpa, Mara Thiene, Kenneth Train

Research output: Contribution to journalArticle

225 Citations (Scopus)

Abstract

We compare two approaches for estimating the distribution of consumers' willingness to pay (WTP) in discrete choice models. The usual procedure is to estimate the distribution of the utility coefficients and then derive the distribution of WTP, which is the ratio of coefficients. The alternative is to estimate the distribution of WTP directly. We apply both approaches to data on site choice in the Alps. We find that the alternative approach fits the data better, reduces the incidence of exceedingly large estimated WTP values, and provides the analyst with greater control in specifying and testing the distribution of WTP. © 2008 Agricultural and Applied Economics Association.
Original languageEnglish
Pages (from-to)994-1010
Number of pages17
JournalAmerican Journal of Agricultural Economics
Volume90
Issue number4
DOIs
Publication statusPublished - Nov 2008

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