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Appears in Collections:Economics Journal Articles
Peer Review Status: Refereed
Title: Cost thresholds, cut-offs and sensitivities in stated choice analysis: identification and implications
Authors: Campbell, Danny
Hensher, David A
Scarpa, Riccardo
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Issue Date: Sep-2012
Publisher: Elsevier
Citation: Campbell D, Hensher DA & Scarpa R (2012) Cost thresholds, cut-offs and sensitivities in stated choice analysis: identification and implications, Resource and Energy Economics, 34 (3), pp. 396-411.
Abstract: Within the discrete choice literature, there is growing recognition that some respondents do not process all attributes when evaluating their choice outcomes. Worryingly, the cost attribute is often among those attributes that are likely to be ignored by respondents. We use probabilistic decision process models (similar in form to latent class models, but where we define the classes to describe specific heuristics) to facilitate situations where respondents adopt cost thresholds and cut-offs. We further develop this model to address the potential confounding between preference heterogeneity and processing heterogeneity by simultaneously allowing for a segmentation of respondents based on their sensitivities to cost. Results, based on an empirical dataset on the existence value of rare fish species in Ireland, provide further confirmation that a share of respondents did not attended to cost. Importantly, however, when heterogeneity to cost levels is accounted for the inferred incidence of complete non-attendance is markedly lower, to the extent that when cost thresholds and cut-offs are also accommodated it almost disappears. This modelling approach leads to significant gains in model fit and has important implications for welfare analysis.
Type: Journal Article
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Rights: The publisher does not allow this work to be made publicly available in this Repository. Please use the Request a Copy feature at the foot of the Repository record to request a copy directly from the author. You can only request a copy if you wish to use this work for your own research or private study.
Affiliation: Economics
University of Sydney
University of Waikato

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