nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2005‒07‒03
fourteen papers chosen by
Philip Yu
Hong Kong University

  1. Collective economic decisions and the discursive dilemma By Carl Andreas Claussen; Øistein Røisland
  2. The impact of unsecured debt on financial distress among British households By Ana Del-Ro; Garry Young
  3. The Value of Habitat and Agriculture By Darla Hatton MacDonald
  4. Select Sets: Rank and File By Abba M. Krieger; Moshe Pollak; Ester Samuel-Cahn
  5. Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals By Sascha O. Becker; Karolina Ekholm; Robert Jäckle; Marc-Andreas Mündler
  6. Generic Scrip Share and the Price of Brand-Name Drugs: The Role of the Consumer By John A. Rizzo; Richard Zeckhauser
  8. Ideology and existence of 50%-majority equilibria in multidimensional spatial voting models By Herve Cres; M. Utku Unver
  9. On Kolm's Use of Epistemic Counterfactuals in Social Choice Theory By John A. Weymark
  10. Dynamic Discrete Choice Modeling: Monte Carlo Analysis By Robert L. Hicks; Kurt Schnier
  11. The Location Decisions of Foreign Logistics Firms in China: Does Transport Network Capacity Matter? By Anthony Chin; Hong Junjie
  12. Using a Choice Experiment to Estimate the Demand of Hungarian Farmers for Food Security and Agrobiodiversity During Economic Transition By Ekin Birol; Andreas Kontoleon; Melinda Smale
  13. Consumer Benefits of Labels and Bans on GMO Foods: An Emprical Analysis Using Choice Experiments By Fredrik Carlsson; Peter Frykblom; Carl-Johan Lagerkvist
  14. Environmental Risk and Averting Behavior: Predictive Validity of Revealed and Stated Preference Data By John C. Whitehead

  1. By: Carl Andreas Claussen (Norges Bank); Øistein Røisland (Norges Bank)
    Abstract: Most economic decisions involve judgments. When decisions are taken collectively, various judgment aggregation problems may occur. Here we consider an aggregation problem called the "discursive dilemma", which is characterized by an inconsistency between the aggregate judgment on the premises for a conclusion and the aggregate judgment on the conclusion itself. It thus matter for the decision whether the group uses a premise- or a conclusion-based decisionmaking procedure. The current literature, primarily within jurisprudence, philosophy, and social choice, consider aggregation of qualitative judgments on propositions. Most economic decisions, however, involve quantitative judgments on economic variables. We develop a framework that is suitable for analyzing the relevance of the discursive dilemma for economic decisions. Assuming that decisions are reached either through majority voting or by averaging, we find that the dilemma cannot be ruled out, except under some restrictive assumptions about the relationship between the premise-variables and the conclusion.
    Keywords: Collective economic decisions, Judgement aggregation, Inconsistency
    JEL: D71 E60
    Date: 2005–06–29
  2. By: Ana Del-Ro; Garry Young
    Abstract: This paper uses evidence from the British Household Panel Survey (BHPS) to examine how attitudes towards unsecured debt are related to household finances and other characteristics. An ordered-logit model is estimated for 1995 and 2000 using a self-reported indicator of financial distress as the dependent variable. This analysis suggests that the main factors causing debt problems are the unsecured debt-income ratio, the level of mortgage income gearing, the level of financial wealth of households, their health, ethnicity and marital status. While the proportion of households reporting debt problems did not change between 1995 and 2000, there were important shifts among different groups. In particular, more households in the youngest age group reported debt repayments were a heavy burden in 2000, while the opposite applies to the oldest age group where a smaller proportion of households than in 1995 reported debt was a heavy burden. These changes can largely be accounted for by the changing economic circumstances of these groups rather than an unrelated shift in attitudes. In particular, the increase in indebtedness of the young was the main factor accounting for their greater tendency to report debt problems.
  3. By: Darla Hatton MacDonald (Policy and Economics Research Unit,CSIRO Land and Water)
    Abstract: The report summarises the results of a non-market valuation study of Habitat and Agriculture in the Upper South East (Upper SE) of South Australia. A non-market valuation technique known as choice modelling was used to elicit values in the form of willingness to pay from people in the Upper SE, Adelaide and the rest of the State. The regional and state-wide preferences for the habitat improvement provide one more piece of information relating to the difficult issues around the configuration of the cleared and uncleared landscape in the Upper South East of South Australia.
    Keywords: Australia;habitat;agriculture;land
    JEL: Q0 Q1 Q2
    Date: 2005–02
  4. By: Abba M. Krieger; Moshe Pollak; Ester Samuel-Cahn
    Abstract: In many situations, the decision maker observes items in sequence and needs to determine whether or not to retain a particular item immediately after it is observed. Any decision rule creates a set of items that are selected. We consider situations where the available information is the rank of a present observation relative to its predecessors. Certain "natural" selection rules are investigated. Theoretical and Monte Carlo results are presented pertaining to the evolution of the number of items selected, measures of their quality and the time it would take to amass a group of a given size. A comparison between rules is made, and guidelines to the choice of good procedures are offered.
    Keywords: Selection rules; Ranks; Nonparametrics; Sequential observations; Asymptotics
    Date: 2005–03
  5. By: Sascha O. Becker; Karolina Ekholm; Robert Jäckle; Marc-Andreas Mündler
    Abstract: Using data for German and Swedish multinational enterprises (MNEs), this paper assesses international employment patterns. It analyzes determinants of location choice and the degree of substitutability of labor across locations. Countries with highly skilled labor forces attract German MNEs, but we find no such evidence for Swedish MNEs. This is consistent with the hypothesis that German MNEs locate production stages intensive in high-skilled labor abroad. In MNEs from either country, affiliate employment tends to substitute for employment at the parent firm. At the margin, substitutability is the strongest with respect to affiliate employment in Western Europe. A one percent larger wage gap between Germany and locations in Central and Eastern Europe (CEE) is estimated to be associated with 900 fewer jobs in German parents and 5,000 more jobs in affiliates located in CEE. A one percent larger wage gap between Sweden and CEE is estimated to be associated with 140 fewer jobs in Swedish parents and 260 more jobs in affiliates located in CEE.
    Keywords: Multinational enterprises; location choice; multinomial choice; labor demand; translog cost function
    JEL: F21 F23 J21 J23
    Date: 2005–05
  6. By: John A. Rizzo; Richard Zeckhauser
    Abstract: Generic drug utilization has risen dramatically, from 19% of scrips in 1984 to 47% in 2001, thus bringing significant direct dollar savings. Generic drug use may also yield indirect savings if it lowers the average price of those brand-name drugs that are still purchased. Prior work indicates - and we confirm - that generic competition does not induce brand-name producers to lower prices. However, consumer choices between generic and brand-name drugs could affect the average price of those brand-name drugs that are purchased. We use nationally representative panel data on drug utilization and costs for the years 1996-2001 to examine how the share of an individual's prescriptions filled by generics affects his average out-of-pocket cost for brand-name drugs. Our principal finding is that a higher generic scrip share lowers average brand-name prices to consumers, presumably because consumers are more likely to substitute generics when the price gap is great. This effect is substantial: a 10% increase in the consumer's generic scrip share is associated with a 15.6% decline in the average price he pays for brand-name drugs.
    JEL: I11 D12 D40
    Date: 2005–06
  7. By: Juan Miguel Villa
    Abstract: Los estudios empíricos que tratan sobre la participación laboral en Colombia muestran que épocas de poco crecimiento económico o recesión aumenta el número de trabajadores secundarios (niños o amas de casa) que deciden ofrecer su fuerza de trabajo. Los hogares más vulnerables a esta situación son aquellos en donde alguno de sus integrantes pierde su actual ocupación y sus ingresos tienden a disminuir. El siguiente estudio tiene como objeto mostrar qué tanto puede disminuir la probabilidad que un trabajador secundario ofrezca su fuerza de trabajo si recibe algún incentivo público en educación (becas, subsidios, créditos), conel uso de los modelos Probit de participación laboral y el uso del Propensity Score Matching. Los resultados muestran que esta clase de incentivos son efectivos para los hombres entre los 12 – 16 años de edad y entre los 12 – 22 años en el caso de las mujeres. También es discriminado el análisis según el número de desocupados por hogar y por medio de la construcción de diez percentiles del Índice de Condiciones de Vida (ICV–2003). La implicaciones en política económica son bastante relevantes puesto que la política fiscal en educación puede ser enfocada hacia la ampliación de estos incentivos, para así evitar que en épocas en las que el ingresos de los hogares disminuye los individuos que se encuentren econonómicamente inactivos no ofrezcan su fuerza de trabajo y lograr de esta manera que no empeoren los indicadores de los mercados laborales (tasa de desocupación y subempleo).
    Keywords: Participación laboral; Capital Humano; Índice de Condiciones de Vida; salario de reserva; Clasificación económica de la población; modelos Probit; Propensity Score Matching.
    JEL: J
    Date: 2005–06–27
  8. By: Herve Cres (HEC Paris); M. Utku Unver (Koc University)
    Abstract: When aggregating individual preferences through the majority rule in an n-dimensional spatial voting model, the `worst-case' scenario is a social choice configuration where no political equilibrium exists unless a super majority rate as high as 1-1/n is adopted. In this paper we assume that a lower d-dimensional (d smaller than n) linear map spans the possible candidates' platforms. These d `ideological' dimensions imply some linkages between the n political issues. We randomize over these linkages and show that there almost surely exists a 50%-majority equilibria in the above worst-case scenario, when n grows to infinity. Moreover the equilibrium is the mean voter. The speed of convergence (toward 50%) of the super majority rate guaranteeing existence of equilibrium is computed for d=1 and 2.
    JEL: D1 D2 D3 D4
    Date: 2005–06–21
  9. By: John A. Weymark (Department of Economics, Vanderbilt University)
    Abstract: Serge Kolm's "epistemic counterfactual principle" says that a social choice only needs to be made from the actual feasible set of alternatives given the actual preference profile, but it must be justified by the choices that would have been made in appropriate counterfactual choice situations. Kolm's principle does not identify the relevant counterfactuals. In this article, it is argued that the appropriate counterfactuals to justify an impartial social choice are all of the choice situations that a moral agent behind a veil of ignorance might think is the actual choice situation outside the veil.
    Keywords: Arrovian social choice, counterfactual choice, veil of ignorance, impartial observer, universal prescriptivism
    JEL: B40 D71
    Date: 2005–06
  10. By: Robert L. Hicks (Department of Economics, College of William and Mary); Kurt Schnier (Department of Environmental and Natural Reseource Economics, University of Rhode Island)
    Abstract: Recent work on spatial models of commercial fishing has provided insights into how spatial regulatory policies (i.e. Marine Protected Areas) are likely to alter the fishing location choices of commercial fishermen and the efficiency of these policies. The applied studies have spanned a diverse range of fisheries, from sedentary to highly migratory species. This literature has largely ignored the inter-temporal aspects of commercial fishing site choice at the cruise level. Therefore, these models depict fishermen as if they are ignoring how a location choice on the first day of a cruise may have potentially important consequences for the rest of the cruise. For many fisheries, particularly highly migratory ones, fishermen might choose a dynamically optimal cruise trajectory rather than myopic day-by-day strategies. An econometric model that ignores the inter-temporal aspects of location choice will likely lead to erroneous conclusions regarding a vesselÕs response to spatial regulatory policies. A dynamic discrete choice model is developed herein that utilizes the same information conventionally used in static models but is entrenched in the principals of dynamic optimization (BellmanÕs principle). Using Monte Carlo analysis, we evaluate the relative performance of this estimator as compared to the conventional static model for a variety of conditions that mimic different fishery types.
    Keywords: Dynamic Discrete Site Choice, Monte Carlo Simulation, Commercial Fishing
    JEL: C15 C35 Q20 Q58
    Date: 2005–06–01
  11. By: Anthony Chin (Department of Economics, National University of Singapore); Hong Junjie (School of International Trade and Economics, University of International Business and Economics, Beijng, China)
    Abstract: In recent years the logistic needs have created tremendous pressure on the ‘hard’ transport infrastructure. Logistics and the harness of information technology are the key facilitators of mobility. The Chinese logistics market is still in its infancy and creates tremendous opportunities for investors. It recognized as one of important driving forces both for national economy and business. Beijing, Tianjin, Shanghai, Shenzhen and Guanzhou aspire to be regional or international logistics hubs and have adopted preferential policies in attracting FDIs in logistics. From 1996 to 2001, foreign capital invested in transportation, storage, post and telecommunications increased from USD6.96 billion to USD15.16 billion. This study looks at the location decisions of foreign logistics firms and identifies with the aid of a multinomial logit model factors that are crucial in attracting them to China. This is important as they have an important role to play in filling in the gap left by traditional Chinese firms, which largely concentrate, on warehousing and distribution. The results suggest that location of logistics firms depends on transport infrastructure, market size, labor quality and cost, agglomeration economies, communication cost, economic privatization degree, as well as government incentives. The importance of the above factors varies by source of region. European and North American firms favor higher population densities, lower labor cost, convenient airway transport and large cities while logistics firms from Hong Kong, Macao and Taiwan put more emphasis on communication infrastructure.
  12. By: Ekin Birol (Homerton College, University of Cambridge, UK); Andreas Kontoleon (Department of Land Economy, University of Cambridge, UK); Melinda Smale (International Food Policy Research Institute, Washington DC, USA and International Plant Genetic Resources Institute, Rome, Italy)
    Abstract: Hungarian home gardens are small farms that are repositories of agrobiodiversity and provide food security during economic transition. We use a choice experiment to test the hypothesis that farmer demand for home gardens will decrease as markets develop with European Union accession. Data represent 22 communities with varying levels of market and social infrastructure. We find that farmers located in more economically developed communities choose to be less dependent on small farms for food and prefer lower levels of agrobiodiversity. Findings indicate that the survival of small farms is jeopardized by economic change, but point to some conservation policy options.
    Keywords: food security, agrobiodiversity, home gardens, choice experiment, multi-functional agriculture
    Date: 2005–06
  13. By: Fredrik Carlsson; Peter Frykblom (Appalachian State University); Carl-Johan Lagerkvist
    Abstract: Applying a choice experiment on the choice of consumer goods we show that Swedish consumers do not regard GMO food as being equivalent to conventional food. A central argument by proponents of GMO is that the end products are identical to those where GMO has not been used. That respondents in our survey disagree with this argument is supported by two observations. First, a positive significant WTP is found for a mandatory labeling policy. This result confirms previous observations that GMO food can be a credence good causing a market failure. Second, consumers are also willing to pay a significantly higher product price to ensure a total ban on the use of GMO in animal fodder. Even if scientists and politicians argue that most of today’s GMO food is indistinguishable from GMO free food, the consumers disagree.
    Date: 2004
  14. By: John C. Whitehead (Appalachian State University)
    Abstract: We conduct predictive validity tests using revealed and stated behavior data from a panel survey of North Carolina coastal households. The application is to hurricane evacuation behavior. Data was initially collected after Hurricane Bonnie led to hurricane evacuations in North Carolina in 1998. Respondents were asked for their behavioral intentions if a hurricane threatened the North Carolina coast during the 1999 hurricane season. Following Hurricanes Dennis and Floyd in 1999, a follow-up survey was conducted to see if respondents behaved as they intended. A jointly estimated revealed and stated behavior model indicates that the hypothetical and real evacuation behavior is based on the same choice process. Using predictions from this model with a hypothetical bias correction we find that it predicts actual evacuation behavior with small forecast error. These results suggest that stated behavior data has some degree of predictive validity.
    Date: 2004

This nep-dcm issue is ©2005 by Philip Yu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.