, Volume 37, Issue 3, pp 473–490 | Cite as

Parameter transfer of common-metric attributes in choice analysis: implications for willingness to pay

  • David A. Hensher
  • David Layton


There is a growing literature that promotes the presence of a mix of compensatory and semi-compensatory processing strategies in the way that individuals evaluate packages of attributes in real or hypothetical markets, and make choices. This paper proposes a specification for the utility form in a choice model to test if, given a pair of attributes with a common-metric (e.g., components of travel time or cost), the attribute with the dominating level defines the marginal (dis)utility that is assigned to both attributes. We refer to this processing strategy as a parameter transfer rule. We use a stated choice data set, in the context of car driving individuals choosing between tolled and non-tolled routes, to estimate a mixed logit model which incorporates the presence of the parameter transfer rule and the conventional fully compensatory rule, both existing up to a probability. We find that if this parameter transfer heuristic is part of the mix, the WTP is more than 30% higher, on average, than when only a fully compensatory rule is imposed. We also contrast the parameter transfer rule with other semi-compensatory heuristics which have been investigated in other papers, and show that the finding adds further support to the accumulating evidence that a semi-compensatory attribute processing rules tend to result in higher mean WTP estimates compared to the fully compensatory attribute processing rule.


Parameter transfer Stated choice designs Information processing Thresholds Willingness to pay Focal attribute Mixed logit Error components 



Research funded under the Australian Research Council Discovery Program grant DP0770618 and the Behavioural Choice Group in the Faculty of Economics and Business at the University of Sydney. David Layton thanks ITLS for support during his academic year sabbatical leave at the University of Sydney. Discussions with John Rose, Stephane Hess and Bill Greene are appreciated, as is extensive advice from three referees and Martin Richards. The very helpful advice of the referees was way beyond what one normally receives.


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Copyright information

© Springer Science+Business Media, LLC. 2010

Authors and Affiliations

  1. 1.Faculty of Economics and Business, Institute of Transport and Logistics StudiesUniversity of SydneySydneyAustralia
  2. 2.Daniel J. Evans School of Public AffairsUniversity of WashingtonSeattleUSA

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