A choice modelling approach to investigate biases in individual and aggregated benefit estimates due to omission of distance

TitleA choice modelling approach to investigate biases in individual and aggregated benefit estimates due to omission of distance
Publication TypeWorking Paper
Year of Publication2004
AuthorsG. Concu
Number2004_12
Keywordsaggregation, choice modelling techniques, distance
Abstract

This paper describes a Choice Modelling experiment set up to investigate the relationship between distance and willingness to pay for environmental quality changes. The issue is important for aggregation and transfer of benefits. So far the problem has been analysed though the use of Contingent Valuation-type of experiments, producing mixed results. The experiment allows testing distance effects on parameters of environmental attributes that imply different trade-offs between use and non-use values. The distance covariate enters the estimated utility function in a flexible form to accommodate for several possible relationships. The sampling procedure is designed to provide a “geographically balanced” sample. Welfare analysis shows that disregarding distance produces under-estimation of individual and aggregated benefits and losses, seriously hindering the reliability of cost-benefit analyses.

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