I have cross-sectional data from a contingent valuation survey. I need to make a dependent variable out of the following three:
1. Would you pay $5 for this product?[Yes=1,No=0]
2. If the answer to the first question is Yes, then would you pay $10 for this product? [Yes=1,No=0]
3. If the answer to the first question is No, would you pay $2 for this product? [Yes=1,No=0]
Here, responses can be 4 types= NN, NY, YN,YY. I was told that I can use ordered probit/logit here. But say, I use 0 for NO, NO, and 4 for YES, YES to first and second questions. But what about NO, YES, or Yes, NO? What values do I assign to these two (i.e. NO, YES or Yes, NO)? If ordered probit/logit does not work, what method I can use here?
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