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Comparing the Latent Class Model with the Random Parameters Logit: A Choice Experiment Analysis of Highly Heterogeneous Electricity Consumers in Hyderabad, India Paper presented at the International Choice Modelling Conference 2011, July 04–06, 2011 in Leeds, UK.

The increased application of the Stated Choice methods led researchers to develop several econometric models that relax the strict assumptions of the frequently applied Conditional Logit model. Especially the question of how to incorporate preference heterogeneity into the analysis is subject to current research. This paper contributes to the discussion by comparing two of the most commonly used models, the Latent Class Logit model and the Random Parameters Logit model. Both models have in common that they introduce heterogeneity in the systematic part of utility but di er in their assumptions of the distribution of preferences. For comparison, data from a choice experiment on electricity quality in India will be analyzed. Thereby, measures of fi t, willingness to pay values and choice probabilities of both models will be contrasted. Apart from the statistical comparison, I discuss further issues that contribute to an adequate choice of the model.