Environmental quality preference and benefit estimation in multinomial probit models: A simulation approach

Simulated maximum likelihood is used to estimate a random parameter multinomial probit model of destination choice for recreational fishing trips, formulated to accommodate varying tastes and varying perceptions of environmental quality across individuals. The restricted likelihood ratio test strongly rejects the independent probit model, which is similar to the independent logit model in both the parameter and benefit estimates. Furthermore, both the Krinsky-Robb and bootstrapping procedures suggest that the benefit (standard deviation) of an environmental policy is found to be markedly lower (higher) when heterogeneous preferences are taken into account.