UNR Joint Economics Working Paper Series Working Paper No. 10-001 Latent Thresholds Analysis of Choice Data with Multiple Bids and Response Options Mimako Kobayashi, Klaus Moeltner and Kimberly Rollins Department of Resource Economics / MS 204 University of Nevada, Reno Reno, NV 89557 (775) 784-6701│ Fax (775) 784-1342 email: moeltner@cabnr.unr.edu March, 2010 Abstract In many stated preference settings stakeholders will be uncertain as to their exact willingness-to- pay for a proposed environmental amenity. To accommodate this possibility analysts have designed elicitation formats with multiple bids and response options that allow for the expression of uncertainty. We argue that the information content flowing from such elicitation has not yet been fully and efficiently exploited in existing contributions. We introduce a Latent Thresholds Estimator that focuses on the simultaneous identification of the full set of thresholds that delineate an individual's value space in accordance with observed response categories. Our framework provides a more complete picture of the underlying value distribution, the marginal effects of regressors, and the impact of bid designs on estimation efficiency. We show that the common practice of re-coding responses to derive point estimate of willingness-to-pay leaves useful information untapped and can produce misleading results if thresholds are highly correlated. JEL Classification: C11, C15, C35, C52, Q51 Keywords: Stated Preference; Multiple Bounded Elicitation; Polychotomous Choice; Bayesian Estimation; Value Uncertainty