Random Regret Minimization: Exploration of a new choice model for environmental and resource economics

This paper introduces the discrete choice model-paradigm of Random Regret Minimization (RRM) to the field of environmental and resource economics. The RRMapproach has been very recently developed in the context of travel demand modelling and presents a tractable, regret-based alternative to the dominant choice-modelling paradigm based on Random Utility Maximization-theory (RUM-theory). We highlight how RRMbasedmodels provide closed form, logit-type formulations for choice probabilities that allow for capturing semi-compensatory behaviour and choice set-composition effects while being equally parsimonious as their utilitarian counterparts. Using data from a Stated Choiceexperiment aimed at identifying valuations of characteristics of nature parks, we compare RRM-based models and RUM-based models in terms of parameter estimates, goodness of fit, elasticities and consequential policy implications.