[Limdep Nlogit List] continuous or categorical price parameter should be used to estimate WTP

Mikołaj Czajkowski miq at wne.uw.edu.pl
Sat Jan 17 22:03:57 EST 2009

Dear Rady,

Some studies would use alternative specific constant for the status quo 
alternative, even if the attributes are generic. The interpretation 
would be that the respondents do / do not have a utility premium for 
changing the status quo. This can in some cases substantially change the 
welfare measures.

A short paragraph suggesting some of the literature:

Including / excluding ASC in welfare estimates of the scenarios is 
discussed by e.g. Adamowicz et al. (1998). Among many studies Rolfe et 
al. (2000), Bennett et al. (2001), Horne et al. (2005), Horne (2006) and 
Birol et al. (2006) included ASC in welfare estimates. On the contrary – 
Xu et al. (2003), Lehtonen et al. (2003), Biénabe and Hearne (2006) and 
Nielsen et al. (2007) include only implicit prices of physical 
attributes. Finally Adamowicz et al. (1998), Garber-Yonts et al. (2004), 
Watson et al. (2004), Mogas et al. (2005) and Meyerhoff et al. 
(forthcoming) report problems that may be encountered when including / 
excluding ASC in welfare estimates. It is thus safe to conclude that 
including / excluding ASC may be decisive for welfare estimates.

Adamowicz WL, Boxall P, Williams M, Louviere JJ (1998) Stated Preference 
Approaches to Measuring Passive Use Values: Choice Experiments versus 
Contingent Valuation. American Journal of Agricultural Economics 80: 64-75
Bennett J, Rolfe J, Morrison MD (2001) Remnant Vegetation and Wetlands 
Protection: Non-market Valuation. In: Bennett J, Blamey RK (eds) The 
Choice Modelling Approach To Environmental Evaluation, Edward Elgar, 
Biénabe E, Hearne RR (2006) Public preferences for biodiversity 
conservation and scenic beauty within the framework of environmental 
services payments. Forest Policy and Economics 9: 335-348
Birol E, Karousakisb K, Koundouric P (2006) Using a Choice Experiment to 
Account for Preference Heterogeneity in Wetland Attributes: The Case of 
Cheimaditida Wetland in Greece. Ecological Economics 60: 145-156
Garber-Yonts BE, Kerkvliet J, Johnson R (2004) Public Values for 
Biodiversity Conservation Policies in the Oregon Coast Range. Forest 
Science 50: 589-602
Horne P (2006) Forest Owners’ Acceptance of Incentive Based Policy 
Instruments in Forest Biodiversity Conservation – A Choice Experiment 
Based Approach. Silva Fennica 40(1): 169–178
Horne P, Boxall CP, Adamowicz WL (2005) Multiple-use Management of 
Forest Recreation Sites: A Spatially Explicit Choice Experiment. Forest 
Ecology and Management 207: 189-199
Lehtonen E, Kuuluvainen J, Pouta E, Rekola M, Li C-Z (2003) Non-market 
Benefits of Forest Conservation in Southern Finland. Environmental 
Science & Policy 6(3): 195-204
Mogas J, Riera P, Bennett J (2005) Accounting for Afforestation 
Externalities: A Comparison of Contingent Valuation and Choice 
Modelling. European Environment 15: 44-58
Nielsen AB, Olsen SB, Lundhede T (2007) An Economic Valuation of the 
Recreational Benefits Associated with Nature-Based Forest Management 
Practices. Landscape and Urban Planning 80: 63-71
Rolfe J, Bennett J, Louviere J (2000) Choice Modelling and its Potential 
Application to Tropical Rainforest Preservation. Ecological Economics 
35: 289-302
Watson DO, McFarlane BL, Haener MK (2004) Human Dimensions of 
Biodiversity Conservation in the Interior Forests of British Columbia. 
BC Journal of Ecosystems and Management 4: 1-20
Xu W, Lippke BR, Perez-Garcia J (2003) Valuing Biodiversity, Aesthetics, 
and Job Losses Associated with Ecosystem Management Using Stated 
Preferences. Forest Science 49: 247-257

Whether the attributes should be dummy- or continuously coded probably 
depends on your attributes and the design. Cost variable is usually 
continuously coded, while dummy coding the levels of attributes allows 
you to see if marginal utilities of subsequent increases are the same.

Good luck and best regards,
     Mikolaj Czajkowski

     Warsaw Ecological Economics Center
     University of Warsaw

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