nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2005‒11‒19
four papers chosen by
Philip Yu
Hong Kong University

  1. An Experimental Investigation of Alternatives to Expected Utility Using Pricing Data By Andrea Morone; Ulrich Schmidt
  2. Identification and Estimation of Discrete Games of Complete Information By Stephen Ryan; Patrick Bajari; Han Hong
  3. Neighborhood Influence and Political Change: Evidence from US School Districts By Johannes Rincke
  4. A Study of a Semiparametric Binary Choice Model with Integrated Covariates By Emmanuel Guerre; Hyungsik Roger Moon

  1. By: Andrea Morone; Ulrich Schmidt
    Abstract: Experimental research on decision making under risk has until now always employed choice data in order to evaluate the empirical performance of expected utility and the alternative non-expected utility theories. The present paper performs a similar analysis which relies on pricing data instead of choice data. Since pricing data lead in many cases to a different ordering of lotteries than choices (e.g. the preference reversal phenomenon) our analysis may have fundamental different results than preceding investigations. We elicit three different types of pricing data: willingness-to-pay, willingness-to-accept and certainty equivalents under the Becker-DeGroot-Marschak (BDM) incentive mechanism. One of our main result shows that the comparative performance of the single theories differs significantly under these three types of pricing data.
    Keywords: expected utility, non-expected utility, experiments, WTP, WTA, BDM
    JEL: C91 D81
    Date: 2005–11
  2. By: Stephen Ryan; Patrick Bajari; Han Hong
    Abstract: We discuss the identification and estimation of discrete games with complete information. Following Bresnahan and Reiss, a discrete game is defined to be a generalization of a standard discrete choice model in which utility depends on the actions of other players. Using recent algorithms that compute the complete set of the Nash equilibria, we propose simulation-based estimators for static, discrete games. With appropriate exclusion restrictions about how covariates enter into payoffs and influence equilibrium selection, the model is identified with only weak parametric assumptions. Monte Carlo evidence demonstrates that the estimator can perform well in moderately-sized samples. As an illustration, we study the strategic decisions of firms in spatially-separated markets in establishing a presence on the Internet
    Keywords: Empirical Industrial Organization, Simulation Based Estimation, Homotopies
    JEL: L13 C14 C15
    Date: 2005–11–11
  3. By: Johannes Rincke (Zentrum für Europäische Wirtschaftsforschung)
    Abstract: This paper investigates how local jurisdictions in a federal system influence each other in the adoption of policy innovations. We look at school districts in Michigan and their participation in a public school choice program launched in 1996. Districts' participation decisions are modelled as simultaneous discrete choice decisions using a spatial latent variable model. Strong effects are found saying that lagged adoptions of neighbors positively affect the current probability of participation. This finding is robust to various changes in specification. The results suggest that in federal systems the diffusion of policy innovations is stimulated by horizontal interactions between jurisdictions.
    JEL: D6 D7 H
    Date: 2005–11–16
  4. By: Emmanuel Guerre; Hyungsik Roger Moon
    Abstract: This paper studies a semiparametric nonstationary binary choice model. Imposing a spherical normalization constraint on the parameter for identification purpose, we find that the MSE and SMSE are at least sqrt(n)-consistent. Comparing this rate to the parametric MLE’s convergence rate, we show that when a normalization restriction is imposed on the parameter, the Park and Phillips (2000)’s parametric MLE converges at a rate of n^(3/4) and its limiting distribution is a mixed normal. Finally, we show briefy how to apply our estimation method to a nonstationary single index model.
    Date: 2005–10

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