Estimating Willingness to Pay Using a Polychotomous Choice Function: An Application to Pork Products with Environmental Attributes

Sean P. Hurley, California Polytechnic State University - San Luis Obispo
Douglas J. Miller, University of Missouri - Columbia
James B. Kliebenstein, Iowa State University

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Copyright © 2006 Western Agricultural Economics Association. The definitive version is available at http://econpapers.repec.org/article/agsjlaare/8618.htm.

Abstract

Bid data from a Vickrey auction for pork chops with embedded environmental attributes were analyzed. It was found that approximately 62% of the participants had a positive WTP for the most "environmentally friendly" package of pork. Thirty percent of the participants had no WTP, and 8% had a negative WTP. A polychotomous choice model was used to accommodate data having an anchoring point within the distribution of the data. Standard variables found in the WTP literature coupled with this model were used to predict participants who were premium payers and non-premium payers using an estimated ordered probit equation.