We Do Not Have the Same Tastes! Evaluating Individual Heterogeneity in the Preferences for Amenities

Are preferences for city attributes heterogeneous? An assessment using a discrete choice experiment

“…The coefficients also agree with the empirical literature using other valuation methods (e.g., Ahumada et al 2019; Ferreira & Moro, 2010; Nuñez et al 2017; Roback, 1982). The three coefficients for crime also reveal that people dislike living in unsafe cities compared to safe cities, confirming the results of Ahumada et al (2019) using revealed preference data for Chile. People also prefer to live in places where access to restaurants, cinema, and parks (entertainment) is moderate and high compared to low access.…”

“…For example, Lo and Jim (2010) found that the households of Hong Kong were willing to pay US$9.90 on a monthly average basis for urban green spaces, whereas Báez‐Montenegro, Bedate, Herrero, and Sanz (2012) found a positive WTP of CLP$16,432 per person for cultural heritage in the city of Valdivia, Chile. Ahumada et al (2019) also found that if the number of parks in the city decreases by one unit, then an average Chilean should be compensated by approximately US$105.…”

“…For example, Brenig and Proeger (2018) using a subjective‐wellbeing approach for Europe, found that a victimized individual would have to be compensated with about 21,790 euro, whereas individuals on average were willing to pay 12,700 euro to increase their feelings of safety from unsafe to safe. Similarly, Powdthavee (2010) using a US sample found that the monetary equivalent of being a victim of robbery, burglaries, housebreaking or murder in the past 12 months was about US$21,142, whereas Ahumada et al (2019) find that Chilean workers living in places with (perceived) robberies should be compensated with US$216 monthly. This latter result is close to our WTP estimate for a safe city.…”

“…For example, highly skilled workers are more attracted to cultural amenities (Niedomysl & Hansen, 2010; Nelson & Ehrenfeucht, 2017), whereas younger individuals prefer places with more access to entertainment (Glaeser et al 2001). As shown by Ahumada et al (2019), preferences for amenities are not only different across individuals due to observable characteristics (deterministic heterogeneity), but also due to unobserved factors such as idiosyncratic tastes. Neglecting both sources of individual heterogeneity might overstate or understate WTP estimates (Roback, 1982), and result in a loss of explanatory power, biased estimates, and misleading conclusions depending on the extent of heterogeneity (Bishop & Timmins, 2019; Hess & Daly, 2014).…”

“…LSA allows researchers to value in monetary terms a change in a certain amenity on individuals' subjective well‐being (or some proxy to individuals' utility) using a compensating variation approach (Clark & Oswald, 2002). LSA has been used to assess the monetary valuation of climate and weather conditions (Ferreira & Moro, 2010; Frijters & Van Praag, 1998; Maddison & Rehdanz, 2011), crime (Brenig & Proeger, 2018; Moore, 2006; Moore & Shepherd, 2006), pollution or environmental (Luger, 1996; Luechinger, 2009; 2010; Levinson, 2012), commuting (Palomino & Sarrias, 2019), green areas (Ambrey & Fleming, 2014), and more general amenities (Ahumada, Iturra, & Sarrias, 2019; Sarrias, 2019).…”