Models for referendum data: The structure of discrete choice models for contingent valuation

Abstract

In 1979, Bishop and Heberlein introduced an appealing variant of the contingent valuation method which required only yes or no responses Hanemann developed a utility-theoretic interpretation of the yes/no responses which has helped popularize the approach. Recently Cameron has offered another interpretation, also utility-theoretic which she argues is more general than the Hanemann random utility model. This paper compares the deterministic models suggested by Hanemann and Cameron, showing them to be dual to each other. It shows that correct specification of either function must exclude endogenous variables such as quantity demanded. It also demonstrates that using utility-theoretic models allows one to compare travel cost models and contigent valuation models on the basis of their implied behavior, not on the unobservable surplus or variation measure.