Semiparametric Estimation of Willingness to Pay Distributions

34 Pages Posted: 13 May 1997

See all articles by Mark Yuying An

Mark Yuying An

Federal National Mortgage Association (Fannie Mae); Duke University

Date Written: July 1996

Abstract

The most popular survey method used in contingent valuations asks "open-ended" dichotomous choice questions. This method generates grouped or interval-censored data on respondents' willingness to pay. This paper specifies the willingness to pay distribution using the proportional hazard specification in duration analysis. This semiparametric distribution, on the one hand, controls for the effects of observed personal characteristics, and on the other, allows the shape of the distribution to be unspecified. To estimate the willingness to pay distribution from grouped data, we propose both a maximum likelihood estimation method and a minimum Chi-square method. The latter procedure applies to "many observations per cell" cases where the observable covariates are either categorical or amendable to sensible grouping. Specification tests for the proportionality assumption are proposed. The statistical inference procedures are illustrated using the data set from the San Joaquin Valley contingent valuation survey.

JEL Classification: C14, C25, Q20

Suggested Citation

An, Mark Yuying, Semiparametric Estimation of Willingness to Pay Distributions (July 1996). Available at SSRN: https://ssrn.com/abstract=37761 or http://dx.doi.org/10.2139/ssrn.37761

Mark Yuying An (Contact Author)

Federal National Mortgage Association (Fannie Mae) ( email )

3900 Wisconsin Avenue, NW
Mail Stop 1H3N-01
Washington, DC 20016-2892
United States
(202) 752-8442 (Phone)
(202) 752-5460 (Fax)

Duke University ( email )

Box 90097
207 Social Sciences
Durham, NC 27708-0097
United States
(919) 660-1809 (Phone)
(919) 684-8974 (Fax)