Using discrete choice experiments for environmental valuation

This paper provides with a review of the state of the art of environmental valuation with discrete choice experiments (DCE). The growing body of literature on this field serves to emphasise the increasing role that DCE are playing in environmental decision making in the last decade. The paper attempts to cover the full process of undertaking a choice experiment, including survey and experimental design, econometric analysis of choice data and welfare analysis. The research on this field is found to be intense, although many challenges are put forward (e.g. choice task complexity and cognitive effort, experimental design, endogeneity or model uncertainty). Reviewing the state of the art of DCE serves to draw attention to the main challenges that this methodological approach will need to overcome in the coming years and to identify the frontiers in discrete choice analysis.The author acknowledges the financial support from the Department of Environment of the Basque Government through IHOBE, S.A. and from the Department of Education of the Basque Government through grant IT-334-07 (UPV/EHU Econometrics Research Group)