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

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.