INFLUENCE OF CHOICE SET CONSIDERATIONS IN MODELING THE BENEFITS FROM IMPROVED WATER-QUALITY

Random utility models have become popular tools for the measurement of economic benefits from environmental quality changes. These models, h owever, require assumptions about the choice sets held by the individu als in the sample. Typically, researchers specify the choice set and a ssume that individuals are aware of all elements of this set. This pap er compares the standard approach with an alternative that uses an est imate of each sampled individual's specific choice set. The latter app roach produces model parameters and welfare estimates that are quite d ifferent from those using standard assumptions.