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

Posted: 3 Sep 2008

See all articles by Riccardo Scarpa

Riccardo Scarpa

University of Waikato - Management School

Mara Thiene

University of Padua

Kenneth E. Train

affiliation not provided to SSRN

Date Written: 2008-02

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.

Suggested Citation

Scarpa, Riccardo and Thiene, Mara and Train, Kenneth E., Utility in Willingness to Pay Space: A Tool to Address Confounding Random Scale Effects in Destination Choice to the Alps (2008-02). American Journal of Agricultural Economics, Vol. 90, Issue 4, pp. 994-1010, November 2008. Available at SSRN: https://ssrn.com/abstract=1263054 or http://dx.doi.org/10.1111/j.1467-8276.2008.01155.x

Riccardo Scarpa (Contact Author)

University of Waikato - Management School ( email )

Hamilton
New Zealand

Mara Thiene

University of Padua ( email )

Via 8 Febbraio, 2
Padova, Vicenza 35122
Italy

Kenneth E. Train

affiliation not provided to SSRN

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