A new baseline model for estimating willingness to pay from discrete choice models

A-Tier
Journal: Journal of Environmental Economics and Management
Year: 2019
Volume: 95
Issue: C
Pages: 57-61

Authors (2)

Score contribution per author:

2.011 = (α=2.01 / 2 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We show a substantive problem exists with the widely-used ratio of coefficients approach to calculating willingness to pay (WTP) from discrete choice models. The correctly calculated standard error for WTP using this approach is shown to be undefined. This occurs because the cost parameter's standard error implies some possibility the true parameter value is arbitrarily close to zero. We propose a simple yet elegant way to overcome this problem by reparameterizing the (negative) cost variable's coefficient using an exponential transformation to enforce the theoretically correct positive coefficient. With it the confidence interval for WTP is now finite and well behaved.

Technical Details

RePEc Handle
repec:eee:jeeman:v:95:y:2019:i:c:p:57-61
Journal Field
Environment
Author Count
2
Added to Database
2026-01-25