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, however, require assumptions about the choice sets held by the individuals in the sample. Typically, researchers specify the choice set and assume that individuals are aware of all elements of this set. This paper compares the standard approach with an alternative that uses an estimate of each sampled individual's specific choice set. The latter approach produces model parameters and welfare estimates that are quite diflferent from those using standard assumptions.