Abstract
This paper explores spatial substitution patterns using a choice experiment to estimate the non-market benefits of environmental quality improvements at different sites presented as labelled alternatives. We develop a novel modelling approach to estimate possible disproportional substitution patterns among these alternatives by including cross-effects in site-specific utility functions, combining mixed and universal logit models. The latter model allows for more flexibility in substitution patterns than random parameters and error-components in mixed logit models. The model is relevant to any discrete choice study that compares multiple sites that vary in their comparability and that may be perceived as (imperfect) substitutes. Applying the model in an empirical case study shows that accounting for cross-effects results in a better model fit. We discuss the validity of welfare estimates based on the inclusion of cross-effects. The results demonstrate the importance of accounting for substitution effects in spatial choice models with the aim to inform policy and decision-making.
Highlights
Many environmental valuation studies involve spatial choices in which subjects and objects are non-uniformly distributed over space (Bateman et al 2003)
The specification of substitution effects between environmental goods and services provided at different locations in a confined geographical area is often neglected in both the design and modelling of stated preferences in site selection discrete choice experiments (DCEs)
This paper addresses spatial substitution patterns for environmental quality improvements across different sites in the same area using a labelled site choice DCE
Summary
Many environmental valuation studies involve spatial choices in which subjects (respondents in a survey) and objects (sites, ecosystem services) are non-uniformly distributed over space (Bateman et al 2003). We show that these cross-effects cannot be captured by random parameters and error-components alone to control for taste heterogeneity and correlation between choice tasks, alternatives and attributes These cross-effects imply that the composition of the choice set, i.e. the inclusion of substitutes to which the site of interest is compared, affects the mean WTP estimates. This approach has, as far as we know, not been used before to capture substitution across sites in environmental valuation and offers more flexibility than the commonly used mixed logit models.
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