Lexicographic Preferences in Discrete Choice Experiments: Consequences on Individual-Specific Willingness to Pay Estimates

28 Pages Posted: 25 Oct 2006

See all articles by Danny Campbell

Danny Campbell

Queen's University Belfast

W. George Hutchinson

Queen's University Belfast

Riccardo Scarpa

University of Waikato - Management School

Date Written: October 2006

Abstract

In discrete choice experiments respondents are generally assumed to consider all of the attributes across each of the alternatives, and to choose their most preferred. However, results in this paper indicate that many respondents employ simplified lexicographic decision-making rules, whereby they have a ranking of the attributes, but their choice of an alternative is based solely on the level of their most important attribute(s). Not accounting for these simple decision-making heuristics introduces systemic errors and leads to biased point estimates, as they are a violation of the continuity axiom and a departure from the use of compensatory decision-making. In this paper the implications of lexicographic preferences are examined. In particular, using a mixed logit specification this paper investigates the sensitivity of individual-specific willingness to pay (WTP) estimates conditional on whether lexicographic decision-making rules are accounted for in the modelling of discrete choice responses. Empirical results are obtained from a discrete choice experiment that was carried out to address the value of a number of rural landscape attributes in Ireland.

Keywords: Continuity axiom, Discrete Choice Experiments, Lexicographic Preferences, Mixed logit, Individual-Specific Willingness to Pay

JEL Classification: C35, Q24, Q51

Suggested Citation

Campbell, Danny and Hutchinson, W. George and Scarpa, Riccardo, Lexicographic Preferences in Discrete Choice Experiments: Consequences on Individual-Specific Willingness to Pay Estimates (October 2006). FEEM Working Paper No. 128.06. Available at SSRN: https://ssrn.com/abstract=936933 or http://dx.doi.org/10.2139/ssrn.936933

Danny Campbell (Contact Author)

Queen's University Belfast ( email )

David Leir Building
Belfast, BT9 5AG
Ireland

W. George Hutchinson

Queen's University Belfast ( email )

David Leir Building
Belfast, BT9 5AG
Ireland

Riccardo Scarpa

University of Waikato - Management School ( email )

Hamilton
New Zealand

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