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Random Regret Minimization: Exploration of a New Choice Model for Environmental and Resource Economics

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Abstract

This paper introduces the discrete choice model-paradigm of Random Regret Minimization (RRM) to the field of environmental and resource economics. The RRM-approach has been very recently developed in the context of travel demand modelling and presents a tractable, regret-based alternative to the dominant choice-modelling paradigm based on Random Utility Maximization-theory (RUM-theory). We highlight how RRM-based models provide closed form, logit-type formulations for choice probabilities that allow for capturing semi-compensatory behaviour and choice set-composition effects while being equally parsimonious as their utilitarian counterparts. Using data from a Stated Choice-experiment aimed at identifying valuations of characteristics of nature parks, we compare RRM-based models and RUM-based models in terms of parameter estimates, goodness of fit, elasticities and consequential policy implications.

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Authors and Affiliations

  1. Dep. TESAF, University of Padua, Viale dell’Università, 35020, Legnaro, Padua, Italy

    Mara Thiene

  2. Gibson Institute for Land, Food and the Environment, Queen’s University of Belfast, Belfast, Northern Ireland, UK

    Marco Boeri

  3. Delft University of Technology, Jaffalaan 5, 2628 BX, Delft, The Netherlands

    Caspar G. Chorus

Authors
  1. Mara Thiene
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  2. Marco Boeri
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  3. Caspar G. Chorus
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Correspondence to Mara Thiene.

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Thiene, M., Boeri, M. & Chorus, C.G. Random Regret Minimization: Exploration of a New Choice Model for Environmental and Resource Economics. Environ Resource Econ 51, 413–429 (2012). https://doi.org/10.1007/s10640-011-9505-7

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