Kendra K. Levine's blog

Special Semiar: Ricardo A. Daziano on "Accounting for Uncertainty in Willingness to Pay for Environmental Benefits"

(130/365) March 3, 2010: Who defines these terms?

Tomorrow, Thursday May 17, there will be a special seminar. Ricardo A. Daziano of Cornell University will present, "Accounting for Uncertainty in Willingness to Pay for Environmental Benefits."

Previous literature on the distribution of willingness to pay has focused on its heterogeneity distribution without addressing the interval estimation problem.  In this paper we derive and analyze Bayesian confidence sets for quantifying uncertainty in the determination of willingness to pay for carbon dioxide abatement. We use two empirical case studies: household decisions of energy-efficient heating versus insulation, and purchase decisions of ultra-low-emission vehicles. We first show that deriving credible sets using the posterior distribution of the willingness to pay is straightforward in the case of deterministic consumer heterogeneity. However, when using individual estimates, which is the case for the random parameters of the mixed logit model, it is complex to define the distribution of interest for the interval estimation problem. This latter problem is actually more involved than determining the moments of the heterogeneity distribution of the willingness to pay using frequentist econometrics. A solution that we propose is to derive and then summarize the distribution of the point estimates of the individual willingness to pay.

The seminar will be in 212 O'Brien Hall from 2-3 PM.

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