nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2005‒10‒08
five papers chosen by
Philip Yu
Hong Kong University

  1. A Review of Stated Choice Method By Junyi Shen
  2. The gain-loss asymmetry and single-self preferences By Antoni Bosch; Joaquim Silvestre
  3. Neural correlates of the affect heuristic during brand choice By Hilke Plassmann; Peter Kenning; Michael Deppe; Harald Kugel; Wolfram Schwindt
  4. Influence of Brand Name in Variety Seeking Behavior of Consumers: An Empirical Analysis By Rajagopal
  5. I ranking internazionali come rimedio alle asimmetrie informative negli sport individuali: il caso del ciclismo professionistico By Davide Tondani

  1. By: Junyi Shen (Osaka School of International Public policy, Osaka University)
    Abstract: This paper reviews Stated Choice Method (SCM), paying particular attentions on its theoretical background, application, empirical models, experimental design, and procedure to execute. The review suggests that comparing to other stated preference (SP) methods, SCM has a major advantage that it meets the objective of a stated preference analysis to simulate actual consumer behavior by allowing simultaneous evaluations of a number of alternatives or a choice between alternatives. Some advanced models based on the degrees of relaxation of the Independently and Identically Distributed (IID) assumption on error terms are introduced. More complex model seems to be more plausible than relatively simple specifications. Two tests for nested and non-nested models are also discussed to help judge that one model is superior to another model. Finally, this paper introduces the procedure of executing a Stated Choice (SC) experiment.
    Keywords: Stated Choice Method (SCM), Stated Preference (SP) method, Independent and Identical Distribution (IID), Extreme Value type I (EV1) distribution
    JEL: C35 C81 C93
    Date: 2005–10
  2. By: Antoni Bosch; Joaquim Silvestre
    Abstract: Kahneman and Tversky asserted a fundamental asymmetry between gains and losses, namely a “reflection effect” which occurs when an individual prefers a sure gain of $ pz to an uncertain gain of $ z with probability p, while preferring an uncertain loss of $z with probability p to a certain loss of $ pz. We focus on this class of choices (actuarially fair), and explore the extent to which the reflection effect, understood as occurring at a range of wealth levels, is compatible with single-self preferences. We decompose the reflection effect into two components, a “probability switch” effect, which is compatible with single-self preferences, and a “translation effect,” which is not. To argue the first point, we analyze two classes of single-self, nonexpected utility preferences, which we label “homothetic” and “weakly homothetic.” In both cases, we characterize the switch effect as well as the dependence of risk attitudes on wealth. We also discuss two types of utility functions of a form reminiscent of expected utility but with distorted probabilities. Type I always distorts the probability of the worst outcome downwards, yielding attraction to small risks for all probabilities. Type II distorts low probabilities upwards, and high probabilities downwards, implying risk aversion when the probability of the worst outcome is low. By combining homothetic or weak homothetic preferences with Type I or Type II distortion functions, we present four explicit examples: All four display a switch effect and, hence, a form of reflection effect consistent a single self preferences.
    Keywords: Reflection, gains, losses, experiments, risk attitude
    JEL: D11 D81
    Date: 2005–09
  3. By: Hilke Plassmann (Stanford NeuroEconomics Lab, Stanford University); Peter Kenning (Department of General Management,); Michael Deppe (Department of Neurology, University of Muenster); Harald Kugel (Department of Radiology, University of Muenster); Wolfram Schwindt (Department of Radiology, University of Muenster)
    Abstract: In this working paper it is investigated how affect and cognition interact in consumer decision making. The research framework is multidisciplinary by applying a neuroscientific method to answer the question which information is processed during brand choice immediately when the decision is computed in the test person’s brain. In a neuroscientific experiment test persons perform binary decision-making tasks between different brands of the same product class. The results suggest that the presence of the respondent’s first choice brand leads to a specific modulation of the neural brain activity, which can be described as neural correlate of Slovic’s affect heuristic concept.
    Keywords: Neuroeconomics, brand choice, cognition, affect
    JEL: C9
    Date: 2005–09–29
  4. By: Rajagopal (Monterrey Institute of Technology & Higher Education ITESM , Mexico City)
    Abstract: The variety-seeking behavior and the brand choice among the consumers have been discussed extensively in the previous research contributions from the stochastic point of view. This study argues that although consumers are seeking novelty and unexpectedness in a brand that they have not bought before, their purchase will be selective, in reference to the empirical investigation. The study has been conducted in Mexican retail business environment with a focus to explore the tendency of decision making of consumers towards buying unfamiliar brands in considering the importance of brand name. The discussions in the paper have been woven around the issues of perceived risk, perceived brand difference, association of brand name and customer values as major influencing factors in making buying decisions towards unfamiliar brands. The study reveals that the perceptions on brand name in reference to brand risk and brand differences have been the prime factors in making buying decision for new brands among the consumers. Consumers also ascertain the brand name associated with the unfamiliar brands as they feel high risk averse and entangle in decision making with perceived brand differences.
    Keywords: Cognitive behavior, personality traits, brand loyalty, brand perceptions, decision making, customer value
    JEL: D11 D12 D81 M20 M31
    Date: 2005–10–04
  5. By: Davide Tondani
    Abstract: Recent studies in information economics demonstrated that asymmetric information existing between market agents induce a lost in efficiency as well as market failures. This paper aims to draw heavily from these theoretical intuitions in order to analyse the individual sports’ environment. The results suggest that the lack of information produces inefficiencies affecting negatively agents welfare, where, agents are sport teams, event promoters and sponsoring firms. By means of a model of signaling, this paper shows that in individual sports, the mechanism of rankings as that introduced in professional tennis or – more recently – in professional cyclism, is able to offset the informative asymmetry about the real abilities of the athlete (agent) and the other actors (principals) of the sport market. In particular, the analysis shows that the signaling mechanism implemented in professional cyclism since 1989 induced a process of convergence of main sponsors on teams supposed to enrol the best cyclists which take part into the main stages and one-day races. L’economia dell’informazione dimostra che in presenza di informazioni asimmetriche tra gli agenti, i mercati tendono a perdere efficienza e a fallire. La stessa teoria, applicata al mondo degli sport individuali, porta a concludere che la carenza informativa produce inefficienze che influenzano il benessere degli agenti di questo particolare mercato: organizzatori di eventi, sponsor, gruppi sportivi. Applicando un modello di signaling, questo articolo mostra come negli sport individuali i ranking di merito, come quelli introdotti nel tennis e più recentemente nel ciclismo professionistico, suppliscono all’asimmetria che intercorre tra l’atleta (agente) e gli altri operatori del mercato sportivo (principali) circa le sue reali abilità sportive. In particolare, si dimostra che il meccanismo di selezione implementato nel ciclismo professionistico a partire dal 1989 ha portato ad un processo di concentrazione degli sponsor con maggiori capacità di investimento pubblicitario sui gruppi sportivi comprendenti atleti con caratteristiche qualitative maggiori e partecipanti al circuito delle competizioni a tappe e in linea più importanti del calendario.
    Keywords: information economics sport signaling ranking asymmetric information
    JEL: D40 D80 D82
    Date: 2005–10–05

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