Please use this identifier to cite or link to this item: http://hdl.handle.net/1893/598
Appears in Collections:Economics Working Papers
Peer Review Status: Unrefereed
Title: Modelling preference heterogeneity in stated choice data: an analysis for public goods generated by agriculture
Authors: Colombo, Sergio
Hanley, Nicholas
Louviere, Jordan
Contact Email: scolombo@ugr.es
Citation: Colombo S, Hanley N & Louviere J (2008) Modelling preference heterogeneity in stated choice data: an analysis for public goods generated by agriculture. Stirling Economics Discussion Paper, 2008-28.
Keywords: choice experiments
covariance heterogeneity model
agri-environmental policy
landscape values
latent class model
preference heterogeneity
random parameter logit model
error component models
welfare measures
JEL Code(s): Q51
Q57
C52
Issue Date: Dec-2008
Series/Report no.: Stirling Economics Discussion Paper, 2008-28
Abstract: Stated choice models based on the random utility framework are becoming increasingly popular in the applied economics literature. The need to account for respondents’ preference heterogeneity in such models has motivated researchers in agricultural, environmental, health and transport economics to apply random parameter logit and latent class models. In most of the published literature these models incorporate heterogeneity in preferences through the systematic component of utility. An alternative approach is to investigate heterogeneity through the random component of utility, and covariance heterogeneity models are one means of doing this. In this paper we compare these alternative ways of incorporating preference heterogeneity in stated choice models and evaluate how the selection of approach affects welfare estimates in a given empirical application. We find that a Latent Class approach fits our data best but all the models perform well in terms of out-of-sample predictions. Finally, we discuss what criteria a researcher can use to decide which approach is most appropriate for a given data set.
Type: Working or Discussion Paper
URI: http://hdl.handle.net/1893/598
Affiliation: Andalusian Institute of Agrarian Research and Training
Economics
University of Technology, Sydney

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