Fat Tails, Flat Tails, and Willingness to Pay: Kriström Revisited

Lynne Y. Lewis, Leslie Richardson and John C. Whitehead

Abstract

This article explores the limitations of two commonly used nonparametric approaches: the Turnbull estimator and the Kriström estimator. Fat tails and flat tails in the distribution of bid responses can result in a large divergence in willingness-to-pay estimates across different estimation methods. Since it is extremely rare to capture the tail of the distribution, we highlight the merit of an alternative approach using 120 datasets drawn from the literature. We calculate four nonparametric estimates of willingness to pay for each dataset. Meta-analysis is used to help determine when the Turnbull and Kriström estimators diverge.

View Full Text

This article requires a subscription to view the full text. If you have a subscription you may use the login form below to view the article. Access to this article can also be purchased.

Purchase access

You may purchase access to this article. This will require you to create an account if you don't already have one.