Utility in Willingness to Pay Space: A Tool to Address Confounding Random Scale Effects in Destination Choice to hte Alps

Oxford University Press
Publication Type:
Journal Article
American Journal of Agricultural Economics, 2008, 90 (4), pp. 994 - 1010
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We compare two approaches for estimating the distribution of consumers willingness to pay (WTP) in discrete choice models. The usual procedure is to estimate the distribution of the utility coef?cients and then derive the distribution ofWTP, which is the ratio of coef?cients. The alternative is to estimate the distribution of WTP directly. We apply both approaches to data on site choice in the Alps. We ?nd that the alternative approach ?ts the data better, reduces the incidence of exceedingly large estimated WTP values, and provides the analyst with greater control in specifying and testing the distribution of WTP.
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