Revealing additional preference heterogeneity with an extended random parameter logit model: the case of extra virgin olive oil

Ahmed Yangui, Montserrat Costa-Font, Jose M. Gil


Methods that account for preference heterogeneity have received a significant amount of attention in recent literature. Most of them have focused on preference heterogeneity around the mean of the random parameters, which has been specified as a function of socio-demographic characteristics. This paper aims at analyzing consumers’ preferences towards extra-virgin olive oil in Catalonia using a methodological framework with two novelties over past studies: 1) it accounts for both preference heterogeneity around the mean and the variance; and 2) it considers both socio-demographic characteristics of consumers as well as their attitudinal factors. Estimated coefficients and moments of willingness to pay (WTP) distributions are compared with those obtained from alternative Random Parameter Logit (RPL) models. Results suggest that the proposed framework increases the goodness-of-fit and provides more useful insights for policy analysis. The most important attributes affecting consumers’ preferences towards extra virgin olive oil are the price and the product’s origin. The consumers perceive the organic olive oil attribute negatively, as they think that it is not worth paying a premium for a product that is healthy in nature.


preference heterogeneity; attitudinal factors; discrete choice model; extra-vigin olive oil; willingness to pay

Full Text:



Allenby GM, Rossi, PE, 1998. Marketing models of consumer heterogeneity. J Econ 89: 57-78.

Ben-Akiva M, McFadden D, Train K, Walker, J, Bhat CA, Bierlaire M, Bolduc D, Börsch-Supan A, Brownstone D, Bunch DS, et al., 2002. Hybrid choice models: Progress and challenges. Mark Let 13: 163-174.

Bhat CR, 2003. Simulation estimation of mixed discrete choice models using randomized and scrambled Halton sequences. Trans Res Part B-Metho 37: 837-855.

Calatrava J, 2002. Actitudes del consumidor espa-ol respecto a los productos ecológicos. Consejería de Agricultura y Pesca de la Junta de Andalucía, Sevilla.

Campbell D, Doherty E, Hynes S, Rensburg TV, 2010. Combining discrete and continuous mixing approaches to accommodate heterogeneity in price sensitivities in environmental choice analysis. Agricultural Economics Society Annual Conf., Edinburg (UK), March 29-31.

Chen MF, 2007. Consumer attitudes and purchase intentions in relation to organic foods in Taiwan: moderating effects of food-related personality traits. Food Qual Prefer 18: 1008-1021.

Chung C, Boyer T, Han S, 2010. How many choice sets and alternatives are optimal? Consistency in choice experiments. Agribusiness 27: 114-125.

Cicia G, Del Guidice T, Scarpa R, 2002. Consumers' perception of quality in organic food: A random utility model under preference heterogeneity and choice correlation from rank-orderings. Brit Food J 104: 200-213.

De Wilde E, Cooke ADJ, Janiszewski C, 2009. Attentional contrast during sequential judgements: A source of the number-of-levels effect. J Mark Res 45: 437-449.

Desmarais BA, Harden JJ, 2013. An unbiased model comparison test using cross-validation. Quality and Quantity: 1-19, published online 27 June. DOI 10.1007/s11135-013-9884-7.

Ding M, Rajdeep G, John L, 2005. Incentive-aligned conjoint analysis. J Mark Res 42: 67-82.

Gil JM, Tamburo LG, Sánchez M, 2002. Seguridad alimentaria y comportamiento del consumidor en Espa-a. Departamento de Agricultura, Gobierno de Aragón, Zaragoza, Spain. 45 pp.

Gracia A, Magistris T, 2007. Organic food product purchase behaviour: a pilot study for urban consumers in the south of Italy. Span J Agr Res 5: 439-451.

Gracia A, Magistris T, 2008. The demand for organic foods in the south of Italy: A discrete choice model. Food Policy 33: 386-396.

Greene WH, Hensher DA, 2013. Revealing additional dimensions of preference heterogeneity in a latent class mixed multinomial logit model. Appl Econ 45: 1897-1902.

Greene WH, Hensher DA, Rose J, 2006. Accounting for heterogeneity in the variance of unobserved effects in mixed logit models. Transport Res B 40: 75-92.

Hensher DA, 2008. Empirical approaches to combining revealed and stated preference data: Some recent developments with reference to urban mode choice. Res Transp Econ 23: 23-29.

Hensher DA, Greene WH, 2003. Mixed logit models: state of practice. Transportation 30: 33-176.

Hensher DA, Rose JM, Greene WH, 2005. Applied choice analysis: a primer. Cambridge Univ Press, Cambridge, UK.

Hess S, Rose JM, 2009. Allowing for intra-respondent variations in coefficients estimated on repeated choice data. Transport Res B 43: 708-719.

Hess S, Rose JM, Bain S, 2010. Random scale heterogeneity in discrete choice models. The transportation research board 89th annual meeting, Washington DC (USA), Jan 10-14. pp. 25.

Hynes S, Hanley N, Scarpa R, 2008. Effects on welfare measures of alternative means of accounting for preference heterogeneity in recreational demand models. Amer J Agr Econ 90: 1011-1027.

Krinsky I, Robb AL, 1986. On approximating the statistical properties of elasticities. Rev Econ Stat 64: 715-19.

Krystallis A, Chryssohoidis G, 2005. Consumers' willingness to pay for organic food. Factors that affect it and variation per organic product type. Brit Food J 107: 320-343.

Lancaster KJ, 1966. A new approach to consumer theory. J Poli Econ 74: 132-157.

Lea E, Worsley T, 2005. Australians' organic food beliefs, demographics and values. Brit Food J 107: 855-869.

Lenk P, DeSarbo W, 2000. Bayesian inference for finite mixtures of generalized linear models with random effects. Psychometrika 65: 93-119.

Louviere JJ, 2001. Choice experiments: An overview of concepts and issues. Edward Elgar Publ. Press, Massachusetts, USA.

Louviere JJ, Hensher DA, 1982. The design and analysis of simulated choice or allocation experiments in travel choice modeling. Transp Res Record 890: 11-17.

Lusk JL, Shroeder TC, 2004. Are choice experiment incentive compatible? A test with quality differentiated beef steaks. Am J Agr Econ 86: 467-482.

McFadden D, 1974. Conditional logit analysis of qualitative choice behavior. Academic Press, NY, USA.

McFadden D, 1986. The choice theory approach to market research. Mark Sci 5: 275-297.

Menapace L, Colson G, Grebitus C, Facendola M, 2011. Consumers' preferences for geographical origin labels: evidence from the Canadian olive oil market. Eur Rev Agr Econ 38: 193-212.

Moore R, 2008. Using attitudes to characterize heterogeneous preferences. Am Agr Econ Assoc Ann Meeting, Orlando, FL, USA, July 27-29.

Morey E, Rossmann KG, 2003. Using stated-preference questions to investigate variations in willingness to pay for preserving marble monuments: classic heterogeneity, random parameters, and mixture models. J Cult Econ 27: 215-229.

Mtimet N, Albisu LM, 2006. Spanish wine consumer behavior: a choice experiment approach. Agribusiness 22: 343-362.

Munuera JL, González-Adalid, MP, 2005. El consumidor europeo de productos ecológicos: primeros resultados de un estudio cualitativo del consumidor espa-ol. Distribución y Consumo 84: 50-64.

Poe GL, Giraud KL, Loomis JB, 2005. Computational methods for measuring the difference of empirical distributions. Am J Agr Econ 87: 353-365.

Revelt D, Train K, 1998. Mixed logit with repeated choices: households' choices of appliance efficiency level. Rev Econ Stat 80: 647-657.

Roitner-Schobesberger B, Darnhofer I, Somsook S, Vogl CR, 2007. Consumer perceptions of organic foods in Bangkok, Thailand. Food Policy 33: 112-121.

Ruiz-Castillo B, 2008. Las denominaciones de orígenes protegidos y el aceite de oliva en Espa-a. Dist y Cons 102: 57-68.

Scarpa R, Del Guidice T, 2004. Market segmentation via mixed logit: extra-virgin olive oil in urban Italy. J Agr Food Ind Org 2: 1-18.

Scarpa R, Thiene M, 2005. Destination choice models for rock climbing in the Northeastern Alps: a latent-class approach based on intensity of preferences. Land Econ 81: 426-444.

Scarpa R, Thiene M, 2011. Organic food choices and protection motivation theory: addressing the psychological sources of heterogeneity. Food Qual Prefer 22: 532-541.

Scarpa R, Thiene M, Train K, 2008. Utility in willingness to pay space: A tool to address confounding random scale effects in destination choice to the Alps. Am J Agr Econ 90: 994-1010.

Schnettler B, Ruiz D, Sepulveda O, Sepulveda N, 2008. Importance of the country of origin in food consumption in a developing country. Food Qual Prefer 19: 372-382.

Shen J, 2010. Latent class model or mixed logit model? A comparison by transport mode choice data. Appl Econ 42: 2915-2924.

Soler F, Gil JM, Sánchez M, 2002. Consumer's acceptability of organic food in Spain. Results from an experimental auction market. Brit Food J 104: 670-687.

Stolz H, Stolz M, Hamm U, Janssen M, Ruto E, 2011a. Consumer attitudes towards organic versus conventional food with specific quality attributes. NJAS-Wageningen J Life Sci 58: 67-72.

Stolz H, Stolz M, Janssen M, Hamm U, 2011b. Preferences and determinants for organic, conventional and conventional-plus products, the case of occasional organic consumers. Food Qual Prefer 22: 772-779.

Street D, Burgess LB, 2007. The construction of optimal stated choice experiments: theory and methods. Wiley-Interscience Press, NJ, USA.

Train K, 2003. Discrete choice methods with simulation. Cambridge Univ. Press, Cambridge, UK.

Train K, Weeks M, 2005. Discrete choice models in preference space and willing-to pay space. In: Applications of simulation methods in environmental and resource economics (Alberini A, Scarpa R, eds.). Dordrecht (The Netherlands), pp: 1-16.

Tsakiridou E, Mattas K, Tzimitra-Kalogianni I, 2006. The influence of consumer characteristics and attitudes on the demand for organic olive oil. J Int Food Agr Mark 1: 23-31.

Van Loo EJ, Caputo V, Nayga JrRM, Meullenet JF, Ricke SC, 2011. Consumers' willingness to pay for organic chicken breast: Evidence from choice experiment. Food Qual Prefer 22: 603-613.

Vega-Zamora M, Parras-Rosa M, Murgado-Armenteros EM, Torres-Ruiz FJ, 2013. The influence of the term organic of organic food purchasing behavior. Procedia-Social and Beh Sci 8: 660-671.

Vega-Zamora M, Parras-Rosa M, Torres-Ruiz FJ, Murgado-Armenteros EM, 2011. Los factores impulsores e inhibidores del consumo de alimentos ecológicos en Espa-a. El caso del aceite de oliva. Iterciencia 36: 178-184.

Vuong QH, 1989. Likelihood ratio tests for models selection and non-nested hypotheses. Econometrica 57: 307-333.

DOI: 10.5424/sjar/2014123-5501