A Semiparametric Distribution for Willingness to Pay and Statistical Inference with Dichotomous Choice Contingent Valuation Data

Abstract

Abstract This paper proposes a semiparametric willingness to pay distribution and discusses several aspects of statistical inference with dichotomous choice contingent valuation data. We study likelihood‐based estimation of the model parameters with and without controlling for unobserved heterogeneity, estimation of the mean and median willingness to pay, and specification tests. These statistical procedures are implemented using a data set. In this application we find that a parametric model is rejected in favor of our semiparametric model, that the heterogeneity can be adequately controlled using a simple density, and that the semiparametric model offers more robust mean willingness to pay estimates.