Choice experiment study on the willingness to pay to improve

Modern forms of energy are an important vehicle towards poverty alleviation in rural areas of developing countries. Most developing countries’ households heavily rely on wood fuel which impact their health and social–economic status. To ease such a dependency, other modern forms of energy, namely electricity, need to be provided. However, the quality of the electricity service, namely reliability, is an important factor in reducing this dependency. This paper discusses a choice experiment valuation study conducted among electrified rural households located in Kisumu, Kenya, in which the willingness to pay (WTP) to avoid power outages or blackouts was estimated. A mixed logit estimation was applied to identify the various socio-economic and demographic characteristics which determine preferences to reduce power outages among a household’s users. In conclusion, several of the socio-economic and demographic characteristics outlined in this paper were identified and can assist service differentiation to accommodate the diverse households’ preferences towards the improvement of the electricity service.developing country, rural, power outages, willingness to pay, random parameter logit

Benchmarking of patents: An application of GAM methodology

The present article reexamines some of the issues regarding the benchmarking of patents using the NBER data base on U.S. patents by generalizing a parametric citation model and by estimating it using GAM methodology. The main conclusion is that the estimated effects differ considerably from sector to sector, and the differences can be estimated nonparametrically but not by the parametric dummy variable approach.USPTO, patent benchmarking, GAM

A More Flexible Model or Simply More Effort? On the Use of Correlated Random Parameters in Applied Choice Studies

The random parameter logit model has become the dominating model for analyzing stated choice data in environmental valuation. The unrestricted version of the model with correlated random parameters, however, is rarely applied. An important advantage of this specification is that the correlations between the parameters are not restricted to zero. These correlations can arise due to a behavioural phenomena or scale heterogeneity. One consequence of this might be that derived willingness-to-pay or to-accept estimates are under- or overestimated, providing decision makers with incorrect estimates. We compare both model specifications using data from a study about farmers’ willingness to accept compensation for implementing agri-environmental measures in Brandenburg, Germany. For this data both model specifications - with and without correlated random parameters - provide similar willing-to-accept estimates, but the model with correlations performs better despite the higher number of parameters. As our findings could be case study specific, we want to encourage especially applied researchers to estimate also specifications with correlated random parameters. Applying only models with uncorrelated random parameters can result in biased estimates and thus provide incorrect information to decision makers.The authors are grateful to Andreas Horbat for his contribution to the development of the survey and its implementation. We also acknowledge the financial support from the Federal German Ministry of Education and Research for the project “NITROLIMIT II - Nitrogene limitation in freshwaters: Is nitrogen reduction ecologically meaningful and economically feasible?“ (FKZ: 033W015DN). Additionally, we want to thank the Spanish Ministry of Economy and Competitiveness through grant ECO2017-82111-R and the Basque Government through grant IT-642- 13 (UPV/EHU Econometrics Research Group)

Comparing the performance of different approaches to deal with attribute non-attendance in discrete choice experiments: a simulation experiment

There is a growing body of literature acknowledging that respondents to DCE often use simplifying strategies, like ignoring one or several attributes to provide with their choices. Two main approaches have appeared to analyse the impact of attribute non-attendance on welfare estimates: the stated non-attendance (SNA) approach and the analytical non-attendance (ANA) approach. Using simulation experiments, this paper investigates the results and reliability of the approaches developed in the recent years in order to deal with attribute non-attendance. The simulation results indicate that the treatments so far proposed are not in all cases suitable. In the absence of correlated errors, the SNA approach seems to provide with unbiased welfare estimates but the ANA approach fails to do so. On the other hand, in the presence of correlated errors, none of the approaches seems to provide with unbiased WTP estimates in all cases.simulation, discrete choice experiments, willingness to pay, attribute non attendance

Interpreting correlated random parameters in choice experiments

The random parameter logit (RPL) model with uncorrelated coefficients is a restrictive version of the mixed logit model, but it is one of the most frequently used models for analysing stated choice data in environmental valuation. The body of applied literature using a more flexible version, the RPL model with correlated coefficients, has been noticeably growing in the last years, but it has still been used less frequently due to its computational complexity and non- trivial interpretation. The correlation matrix of the coefficients in this model captures not only the correlation due to a behavioural phenomenon but also the correlation caused by scale heterogeneity. These two effects cannot be identified empirically. Nevertheless, this paper proposes a simple procedure that enables an interpretation of some of the estimated correlations, which can help to disentangle the unobserved preference heterogeneity. The proposed procedure consists of two simple steps. Firstly, the signs of the attributes corresponding to the utility coefficients that have a negative mean coefficient are reversed. Secondly, only negative correlations are interpreted. We propose a theoretical model accounting for correlations induced both by hypothetical behavioural phenomena and by scale heterogeneity and apply the proposed procedure to three typical cases of environmental valuation.The authors are grateful the FEDER/Spanish Ministry of Economy and Competitiveness through grant ECO2017-82111-R and the Basque Government through grants IT-642- 13 (UPV/EHU Econometrics Research Group) and IT783-13. The data have been obtained through collaboration of the IHOBE (Basque Environmental Agency) and the University of the Basque Country (UPV/EHU) through the research project 2008.0101 (UPV/EHU) and under the agreement between Diputación Foral de Álava and the University of the Basque Country (Ref: 2010-2970)

Incorporating attitudes into the evaluation of preferences regarding agri-environmental practices

Many stated preference studies have shown that individuals’ attitudes play an important role in explaining their behaviour and helping to disentangle preference heterogeneity. When responses to attitudinal questions are introduced into discrete choice models, a suitable approach that corrects for potential endogeneity must be adopted. We use a discrete choice experiment to analyse the preferences of residents regarding the use of agri-environmental practices in the peri-urban area of Milan (Italy). A detailed analysis of these preferences is relevant for policymakers as farmers on the peri-urban fringe are often asked to provide environmental services to urban-dwellers. We apply a latent class model that we extend to include indicators of individuals’ attitudes towards the relationship between agriculture and the environment. Besides the application of the control function approach to deal with endogeneity, our main contribution is the use of a refutability test to check the exogeneity of the instruments in the agri-environmental setting. Our results show that attitudinal indicators help to disentangle the preference heterogeneity and that the respondents’ willingness-to- pay distribution differs according to the indicators’ values.The authors acknowledge the financial support from the Italian Ministry of Education, University and Research through the ‘Leonardo da Vinci’ grant; FEDER/Spanish Ministry of Science, Innovation and Universities through the ECO2017-82111-R grant; and the Basque Government through the IT1359-19 (UPV/EHU Econometrics Research Group) grant

A time varying coefficient model for panel data: Foreign Direct Investment in European OECD countries

The present article reexamines some of the issues regarding the Knowledge-Capital Model that encompasses both horizontal and vertical Foreign Direct Investment described in detail in the literature. The empirical support for this model is however a mixture. This article proposes a new way of estimating coefficients by allowing them to vary over time. The estimation results obtained using data from fourteen European countries for the period from 1982 to 2004 confirm that these coefficients cannot be considered constant over time and that the vertical component of the Knowledge-Capital Model is relevant even in the context of European countries with relatively similar endowments.time-varying coefficients, foreign direct investment

Parents’ Willingness to Pay for Bilingualism: Evidence From Spain

We analyse parental school preferences in two contiguous provinces of northern Spain, which offer very different school choices since only one of them is bilingual. Basque- Spanish bilingualism affects the school system, labour market, and, consequently, family budgets in the Basque Country. In Cantabria, Spanish is the only official language, and English is the second language typically offered in the school system. Using two discrete choice experiments applied to school choice, we estimate parents’ willingness to pay for different school characteristics in the two areas. We find that the most highly valued school characteristic in both areas is the language of instruction, but in the Basque Country, where the minority language indirectly has a wage premium in the local labour market, its importance relative to other characteristics is more salient.Open Access funding provided thanks to the CRUE-CSIC agreement with Springer Nature. The authors acknowledge finan- cial support from FEDER/Ministry of Science, Innovation and Universities [MCIN/AEI/10.13039/501100011033 through Grant PID2020-113650RB-I00] and the Basque Government through grant IT1359-19 (UPV/EHU Econometrics Research Group) and Grant IT1336-19 (Bilbao Research Team in Economics)

Spanish Customer Satisfaction Indices by Cumulative Panel Data

In this paper, we present a new theoretical representation of the Consumer Satisfaction Index (CSI) based on Structural Equation Modelling (SEM). We use panel data collected by an automotive magazine to apply our approach and assess the applicability in the field of marketing by formulating a competitive strategy in the Spanish automobile industry. The basic structure of the CSI is based upon well established theories and approaches to customer satisfaction (see Fornell 1992; Fornell et al., 1996). The structure based upon these theories consists of a number of latent factors, each of which is operationalised by multiple measures. The purpose of this paper is to propose a new way of representing the structure of Spanish Consumer Satisfaction (CS) in the automobile industry to study and compare the implications of its representations. We will discuss that CSI is a global evaluation constructed on the basis of its particular component evaluations. Apart from building a new way of representing the structure of CS, this work tries to correct for the bias produced by the particular method of calculus employed by the magazine.Structural Equation Modeling (SEM), factor analysis, cumulative panel data

Selecting random parameters in discrete choice experiment for environmental valuation: A simulation experiment

This paper examines the various tests commonly used to select random parameters in choice modelling. The most common procedures for selecting random parameters are: the Lagrange Multiplier test as proposed by McFadden and Train (2000), the t-statistic of the deviation of the random parameter and the log-likelihood ratio test. The identification of random parameters in other words the recognition of preference heterogeneity among population is based on the fact that an individual makes a choice depending on her/his: tastes, perceptions and experiences. A simulation experiment was carried out based on a real choice experiment and the results indicated that the power of these three tests depends importantly on the spread and type of the tested parameter distribution.choice experiment, simulation, preference heterogeneity, random parameter logit, tests for selecting random parameters