Bounding WTP distributions to reflect the 'actual'consideration set


Campbell D, Hensher DA & Scarpa R (2014) Bounding WTP distributions to reflect the 'actual'consideration set. Journal of Choice Modelling, 11, pp. 4-15.

In this paper we extend the independent availability logit and combined latent class mixed logit models to accommodate respondents with different consideration sets due to their cost thresholds and cut-offs. Pertinent features of our model are that it is estimated in WTP-space and that the class-specific WTP distributions are truncated to be within the bounds deduced from the cost level(s) within each class-specific consideration set. Our analysis shows that our approach is well suited at uncovering the heterogeneity in the cost thresholds and cut-offs used by respondents. This is shown to help build a richer insight into respondent׳s behaviour as well as raise a number of concerns about the appropriateness of assuming deterministic choice sets. We discuss the implications of our results for welfare analysis.

Independent availability logit model; Combined latent class mixed logit model; Willingness to pay; Consideration set; Cost threshold; Elimination-by-aspects

Journal of Choice Modelling: Volume 11

Publication date30/06/2014