Modeling preference heterogeneity in stated choice data: An analysis for public goods generated by agriculture

S. Colombo, N. Hanley, J. Louviere

    Research output: Contribution to journalArticlepeer-review

    126 Citations (Scopus)

    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 article we compare these alternative ways of incorporating preference heterogeneity in stated choice models and evaluate the sensitivity of estimated welfare measures to which approach is selected. 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.
    Original languageEnglish
    Pages (from-to)307-322
    Number of pages16
    JournalAgricultural Economics
    Volume40
    Issue number3
    Early online date14 Apr 2009
    DOIs
    Publication statusPublished - May 2009

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