Implications of Model Specification for Welfare Estimation in Nested Logit Models (The)

Nested logit models are increasingly being used to value environmental amenities. The implications of nesting structure, choice of estimator (FIML or sequential), and restrictions on parameters across nested groups on welfare estimates are examined. These issues have received little previous attention. Model selection criteria that can be used to distinguish among the models are extended and applied. Additionally, a simulation procedure is implemented to construct standard errors for the welfare measures.