nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2005‒12‒09
ten papers chosen by
Philip Yu
Hong Kong University

  1. Detecting Starting Point Bias in Dichotomous-Choice Contingent Valuation Surveys By Marcella Veronesi; Anna Alberini; Joseph C. Cooper
  2. Using Expert Judgment to Assess Adaptive Capacity to Climate Change: Evidence From a Conjoint Choice Survey By Anna Alberini; Aline Chiabai; Lucija Muehlenbachs
  3. Collective Labour Supply: Heterogeneity and Non-Participation By Blundell, Richard William; Chiappori, Pierre-André; Magnac, Thierry; Meghir, Costas
  4. Minorities and Storable Votes By Alessandra Casella; Thomas Palfrey; Raymond Riezman
  5. Bank Control and the Number of Bank Relations of Japanese Firms By Kazuo Ogawa; Elmer Sterken; Ichiro Tokutsu
  6. Efficiency, Equity and Timing in Voting Mechanisms By Battaglini, Marco; Morton, Rebecca; Palfrey, Thomas R
  7. Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart By Jerry Hausman; Ephraim Leibtag
  8. How to Construct Alternatives. A computational voting model By Luigi Marengo; Corrado Pasquali
  9. Satisfaction in Choice as a Function of the Number of Alternatives: When "Goods Satiate" but "Bads Escalate" By Elena Reutskaja; Robin Hogarth
  10. Employment in Poland 2005 By Maciej Bukowski; Piotr Lewandowski; Iga Magda; Malgorzata Sarzalska; Julian Zawistowski

  1. By: Marcella Veronesi (University of Maryland); Anna Alberini (University of Maryland and Fondazione Eni Enrico Mattei); Joseph C. Cooper (The Resource and Rural Economics Division, Economic Research Service)
    Abstract: We examine starting point bias in CV surveys with dichotomous choice payment questions and follow-ups, and double-bounded models of the WTP responses. We wish to investigate (1) the seriousness of the biases for the location and scale parameters of WTP in the presence of starting point bias; (2) whether or not these biases depend on the distribution of WTP and on the bids used; and (3) how well a commonly used diagnostic for starting point bias—a test of the null that bid set dummies entered in the right-hand side of the WTP model are jointly equal to zero—performs under various circumstances. Because starting point bias cannot be separately identified in any reliable manner from biases caused by model specification, we use simulation approaches to address this issue. Our Monte Carlo simulations suggest that the effect of ignoring starting point bias is complex and depends on the true distribution of WTP. Bid set dummies tend to soak up misspecifications in the distribution assumed by the researcher for the latent WTP, rather than capturing the presence of starting point bias. Their power in detecting starting point bias is low.
    Keywords: Anchoring, Dichotomous choice contingent valuation, Starting point bias, Double-bounded models, Estimation bias
    JEL: Q51
    Date: 2005–09
  2. By: Anna Alberini (University of Maryland); Aline Chiabai (Fondazione Eni Enrico Mattei); Lucija Muehlenbachs (AREC, University of Maryland)
    Abstract: We use conjoint choice questions to ask public health and climate change experts, contacted at professional meetings in 2003 and 2004, which of two hypothetical countries, A or B, they deem to have the higher adaptive capacity to certain effects of climate change on human health. These hypothetical countries are described by a vector of seven attributes, including per capita income, inequality in the distribution of income, measures of the health status of the population, the health care system, and access to information. Probit models indicate that our respondents regard per capita income, inequality in the distribution of income, universal health care coverage, and high access to information as important determinants of adaptive capacity. A universal-coverage health care system and a high level of access to information are judged to be equivalent to $12,000-$14,000 in per capita income. We use the estimated coefficients and country sociodemographics to construct an index of adaptive capacity for several countries. In panel-data regressions, this index is a good predictor of mortality in climatic disasters, even after controlling for other determinants of sensitivity and exposure, and for per capita income. We conclude that our conjoint choice questions provide a novel and promising approach to eliciting expert judgments in the climate change arena.
    Keywords: Adaptive capacity, Climate change, Human health effects, Extreme events, Heat waves, Vector-borne illnesses, Conjoint choice, Vulnerability, Sensitivity
    JEL: Q54 I18
    Date: 2005–09
  3. By: Blundell, Richard William; Chiappori, Pierre-André; Magnac, Thierry; Meghir, Costas
    Abstract: We present identification and estimation results for the 'collective' model of labour supply in which there are discrete choices, censoring of hours and non-participation in employment. We derive the collective restrictions on labour supply functions and contrast them with restrictions implied by the usual 'unitary' framework. Using the large changes in the wage structure between men and women in the UK over the last two decades we estimate a collective labour supply model for married couples without children. The implications of the unitary framework are rejected while those of the collective approach are not. The estimates of the sharing rule show that wages have a strong influence on bargaining power within couples.
    Keywords: collective models; labour supply
    JEL: D11 D12 D13 D70 J22
    Date: 2005–10
  4. By: Alessandra Casella; Thomas Palfrey; Raymond Riezman
    Abstract: The paper studies a simple voting system that has the potential to increase the power of minorities without sacrificing aggregate efficiency. Storable votes grant each voter a stock of votes to spend as desired over a series of binary decisions. By accumulating votes on issues that it deems most important, the minority can win occasionally. But because the majority typically can outvote it, the minority wins only if its strength of preference is high and the majority’s strength of preference is low. The result is that with storable votes, aggregate efficiency either falls little or in fact rises. The theoretical predictions of our model are confirmed by a series of experiments: the frequency of minority victories, the relative payoff of the minority versus the majority, and the aggregate payoffs all match the theory.
    JEL: D70
    Date: 2005
  5. By: Kazuo Ogawa; Elmer Sterken; Ichiro Tokutsu
    Abstract: We explore the determinants of the number of long-term bank relations of listed Japanese firms using a unique data set covering the period 1982-1999. Japanese listed firms have about seven long-term bank loan relations on average, but show a large variation around the average. We analyze the determinants of the choice for the number of bank relations. We use data on loan and equity ownership to address the impact of the Japan-specific bank-firm relations and bank control on the number of loans decision. Having a relation with a top-equity holding bank reduces the number of bank relations, while debt-rich and cash-poor firms have more bank relations.
    Keywords: firm-bank relations, single versus multiple borrowing, bank control, discrete choice models
    JEL: G21 G32
    Date: 2005
  6. By: Battaglini, Marco; Morton, Rebecca; Palfrey, Thomas R
    Abstract: We compare the behaviour of voters, depending on whether they operate under sequential and simultaneous voting rules, when voting is costly and information is incomplete. In many real political institutions, ranging from small committees to mass elections, voting is sequential, which allows some voters to know the choices of earlier voters. For a stylized model, we characterize the equilibria for this rule, and compare it to simultaneous voting, and show how these equilibria vary for different voting costs. This generates a variety of predictions about the relative efficiency and equity of these two systems, which we test using controlled laboratory experiments. Most of the qualitative predictions are supported by the data, but there are significant departures from the predicted equilibrium strategies, in both the sequential and simultaneous voting games. We find a tradeoff between information aggregation, efficiency, and equity in sequential voting: a sequential voting rule aggregates information better, and produces more efficient outcomes on average, compared to simultaneous voting, but sequential voting leads to significant inequities, with later voters benefiting at the expense of early voters.
    Keywords: committees; costly voting; information aggregation; sequential voting
    JEL: D71 D72
    Date: 2005–10
  7. By: Jerry Hausman; Ephraim Leibtag
    Abstract: Consumers often benefit from increased competition in differentiated product settings. In this paper we consider consumer benefits from increased competition in a differentiated product setting: the spread of non-traditional retail outlets. In this paper we estimate consumer benefits from supercenter entry and expansion into markets for food. We estimate a discrete choice model for household shopping choice of supercenters and traditional outlets for food. We have panel data for households so we can follow their shopping patterns over time and allow for a fixed effect in their shopping behavior. We find the benefits to be substantial, both in terms of food expenditure and in terms of overall consumer expenditure. Low income households benefit the most.
    JEL: D1 D3 D4 D6
    Date: 2005–12
  8. By: Luigi Marengo; Corrado Pasquali
    Abstract: Social choice models usually assume that choice is among pre-defined, uni-dimensional and "simple" objects. Very often, on the contrary, choice is among multi-featured and "complex" objects: a candidate in an election stands for an electoral programme which is a complex bundle of many interdependent political positions on a wide variety of issues. Also in committees and organizations of various sorts collective choices are most often made among policy "bundles" and authorities can act upon the pre-choice stage of construction of such bundles. This pre-choice power of alternatives construction may grant authorities a highly effective device to influence the outcome of social choice even when the latter is totally free and democratic. In this paper we propose a model which investigates within a simple majority vote framework the role of the object construction power, an analogous to the agenda power. Even when object construction is simply defined as the possibility of assembling and dis-assembling a fixed set of choice components into bundles, we show that, under rather general conditions, it can radically change the outcome of the majority voting process. In particular we show that any set of bundles (that we call "choice modules") is associated to a set of possible social outcomes which can be attained depending upon the initial conditions. Moreover we shows that also Condorcet-Arrow cycles can appear or disappear depending upon which set of modules is chosen.
    Date: 2005–11–24
  9. By: Elena Reutskaja; Robin Hogarth
    Abstract: People often prefer to choose from small as opposed to large sets of alternatives. We propose that satisfaction from choice is an inverted U-shaped function of the number of alternatives. This proposition is derived theoretically by considering the benefits and costs of different numbers of alternatives and is supported by three experimental studies. Because, in large sets, the perceptual costs of processing alternatives varying in shape are greater than for alternatives varying in color, we also predict and demonstrate greater satisfaction from choosing from the latter. We further show that the "satisfaction function" is affected by gender and cultural background.
    Keywords: Consumer choice, perception of variety, tyranny of choice, visual perception, cultural differences
    JEL: D12 M10 M31
    Date: 2005–11
  10. By: Maciej Bukowski (Warsaw School of Economics, Institute for Structural Research); Piotr Lewandowski (Warsaw School of Economics, Institute for Structural Research); Iga Magda (Ministry of Economy); Malgorzata Sarzalska (Ministry of Economy); Julian Zawistowski (Ministry of Economy, Institute for Structural Research)
    Abstract: This publication is a non-technical report prepared for Polish Ministry of Economy and Labor. The main goal is to present a comprehensive statistical and econometric analysis of employment, unemployment and participation in Poland in the period 1998-2004 and confront Polish experiences with international empirical and theoretical studies in labor economics. Also the qualitative survey of institutional background of labor market in Poland is conducted. We complement our research with some policy prescriptions. At the moment Poland exhibits the highest unemployment rate in OECD and one of the lowest employment and participation rates. We begin with a detailed analysis of the reasons of the rapid decrease of employment and increase of unemployment in 1998- 1999 and its later persistence. We find that the supply-side characteristics and sectoral structure of the economy significantly influenced the strength and the durability of the effects of the Russian crisis of 1998 and of the adverse supply shock that affected Polish economy in 2001-2002. We scrutinize the ability of various groups of workers (by age and education level attained) to cope with both shocks and constantly undertaken restructuring. We also focus on structural mismatch between labour demand and labour supply in Poland. We find that the employment gap between Poland and UE15 is mostly due to low participation/employment of older workers in Poland, although individuals aged 15-24 also contribute to this gap. However, we show that low participation of young is mostly connected to lengthening of average education spells whereas older workers take advantage of the social security benefits subsidizing leisure. We complement our analysis with multinomial logit of transitions on Polish labor market. Then we turn to the role played educational system in the accumulation of the human capital by young people, and we evaluate the life-long learning in Poland. We find that schooling system is rather inefficient in shaping creativity and solving problems exceeding schematic procedures and algorithms. Then we focus on the influence exerted in Poland by standard labor market institutions, like social security system, taxes, minumum wages, trade unions, employment protection legislation, active labor market policy. In each case we begin with description of the shape of these institutions in Poland and then we empirically assess their relative importance for labour market performance.
    Keywords: Poland, unemployment, employment, participation, labor market institutions, social security, human capital in transition countries
    JEL: E24 H31 H55 J20 J21 J22 J68 P23
    Date: 2005–12–01

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.
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