DP7030 Using Elicited Choice Probabilities to Estimate Random Utility Models: Preferences for Electricity Reliability

Author(s): Asher Blass , Saul Lach , Charles Manski

Publication Date: November 2008

Keyword(s): Choice probabilities , stated choices , WTP for electricity reliability

JEL(s): C2 , C25 , C42 , D12 , L51 , L94

Programme Areas: Industrial Organization

Link to this Page: www.cepr.org/pubs/dps/DP7030.asp.asp

When data on actual choices are not available, researchers studying preferences sometimes pose choice scenarios and ask respondents to state the actions they would choose if they were to face these scenarios. The data on stated choices are then used to estimate random utility models, as if they are data on actual choices. Stated choices may differ from actual ones because researchers typically provide respondents with less information than they would have facing actual choice problems. Elicitation of choice probabilities overcomes this problem by permitting respondents to express uncertainty about their behavior. This paper shows how to use elicited choice probabilities to estimate random utility models with random coefficients and applies the methodology to estimate preferences for electricity reliability in Israel.