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Environmental and Resource Economics

, Volume 47, Issue 4, pp 477–493 | Cite as

Combining Discrete and Continuous Representations of Preference Heterogeneity: A Latent Class Approach

  • Angel BujosaEmail author
  • Antoni Riera
  • Robert L. Hicks
Article

Abstract

Unobserved preference heterogeneity has been widely recognized as a critical issue not only for modelling choice behaviour, but also for policy analysis. This paper examines alternative approaches for incorporating heterogeneity in recreational demand. We apply a hybrid model combining discrete and continuous heterogeneity representations of tastes to capture the defining features of both the latent class and the random parameter logit specifications. This model allows for the joint estimation of discrete segments and within segment heterogeneity providing a richer interpretation of preference heterogeneity. A database of recreational trips to forest sites in Mallorca has been used to compare the empirical performance of this hybrid approach with common specifications such as the conditional logit, the random parameter logit, and the latent class model.

Keywords

Travel cost method Recreation demand Random parameter model Latent class model Forests 

Abbreviations

CL

Conditional logit

RPL

Random parameter logit

LC

Latent class

LC-RPL

Latent class-random parameter logit

WTP

Willingness-to-pay

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Copyright information

© Springer Science+Business Media B.V. 2010

Authors and Affiliations

  1. 1.Centre de Recerca Econòmica (UIB · Sa Nostra)Palma de MallorcaSpain
  2. 2.Department of EconomicsCollege of William and MaryWilliamsburgUSA

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