nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2006‒11‒04
five papers chosen by
Philip Yu
Hong Kong University

  1. The Discrete Choice Analytically Flexible (DCAF) Model of Demand for Differentiated Products By Davis, Peter J
  2. Time Preference, Time Discounting, and Smoking Decisions By Ahmed Khwaja; Dan Silverman; Frank Sloan
  3. The Mismatch between Employment and Child Care in Italy: the Impact of Rationing By Daniela Del Boca; Daniela Vuri
  5. Temporary Jobs and State Dependence in Italy By Matteo PICCHIO

  1. By: Davis, Peter J
    Abstract: In this paper I develop the Discrete Choice Analytically Flexible (DCAF) model of demand for differentiated products. DCAF relaxes the constraints imposed on the matrix of own- and cross-price elasticities of demand by popular analytic discrete choice models such as the Multinomial Logit (MNL) and Nested MNL models. At the same time, in contrast to models such as Probit (Hausman and Wise (1978)) and Random Coefficient-MNL (RC-MNL) models (Berry, Levinsohn and Pakes (1995)), DCAF does not require estimation via simulation; it is fully analytic. I show DCAF is a flexible functional form in the sense of Diewert (1974), thus ensuring that its parameters can be chosen to match a well defined class of possible own- and cross-price elasticities of demand. Under well defined constraints on the parameters, which may or may not be imposed in estimation, DCAF is shown to be a previously unexplored member of Mcfadden's(1978) class of Multivariate Extreme Value (MEV) discrete choice models. Hence, under testable parameter restrictions, DCAF is fully consistent with an underlying structural model of heterogeneous, utility maximizing, consumers. I provide a small monte-carlo study to illustrate use of the model and establish its properties. A full application of the model using data from the UK confectionary market is provided in the companion paper, Davis (2006).
    Keywords: demand; demand models; discrete choice; extreme value
    JEL: C0 C3 D1 L0
    Date: 2006–10
  2. By: Ahmed Khwaja; Dan Silverman; Frank Sloan
    Abstract: This study examines the relationship between time discounting, other sources of time preference, and intertemporal choices about smoking. Using a survey fielded for our analysis, we elicit rates of time discount from choices in financial and health domains. We also examine the relationship between other determinants of time preference and smoking status. We find very high rates of time discount in the financial realm for a horizon of one year, irrespective of smoking status. In the health domain, the implied rates of time discount decline with the length of the time delay (hyperbolic discounting) and the sign of the payoff (the “sign effectâ€). We use a series of questions about the willingness to undergo a colonoscopy to elicit short- and long-run rates of discount in a quasi-hyperbolic discounting framework, finding no evidence that short-run and long-run rates of discount differ by smoking status. Using more general measures of time preference, i.e., impulsivity and length of financial planning horizon, smokers are more impatient. However, neither of these measures is significantly correlated with the measures of time discounting. Our results indicate that subjective rates of time discount revealed through committed choice scenarios are not related to differences in smoking behavior. Rather, a combination of more general measures of time preference and self-control, i.e., impulsivity and financial planning, are more closely related to the smoking decision.
    JEL: D84 D91 I12
    Date: 2006–10
  3. By: Daniela Del Boca; Daniela Vuri
    Abstract: In Italy the participation of women has not increased very much in the last few decades relative to other developed countries and it is still among the lowest in Europe. The female employment rate stands almost 13 percentage points below the EU average and 22 below the Lisbon target. One of the most important reasons is related to the characteristics of child care system. In this paper we analyze the characteristics of the child care system in Italy and its relationship to the labor market participation decision of mothers. We present a simple discrete choice framework in which the two decisions can be jointly considered, which also allows for simple forms of rationing. We go on to estimate a bivariate probit model of the child care and employment decisions and interpret the results within the framework of our model. We find evidence that rationing is an important factor in interpreting price effects on utilization rates and employment decisions.
    Keywords: Labor Market Decisions, Fertility, Child care.
    JEL: J2 C3 D1
    Date: 2006
  4. By: Rachel Levy; Pascale Roux; Sandrine Wolff
    Abstract: This paper analyses the modalities according to which a large European university collaborates with firms by exploring its relational portfolio. We address this issue by exploiting a database listing more than 1000 firms having collaborated with the University Louis Pasteur between 1990 and 2002. First, using multi-correspondence analysis, we derive a four-classes typology of collaborative behaviours, each of them presenting a strong internal coherence. We obtain four distinct collaboration patterms, for which the frequency of interactions and the exclusive vs. open character of the relationships are discriminating features. Second, using a multinomial logit estimation, we show how this diversity is connected to some individual attributes of the firms: size, legal status, industrial sector and geographic distance from the public partner.
    Keywords: Science-industry collaborations; Typology; Industrial collaboration patterns.
    JEL: L21 L31 O32
    Date: 2006
  5. By: Matteo PICCHIO (Universita' Politecnica delle Marche, Dipartimento di Economia)
    Abstract: A dynamic unobserved effects probit analysis has been carried out to test the hypothesis of state dependence of temporary jobs and to understand their determinants. The econometric analysis has been conducted using the 2000, 2002, and 2004 waves of the Survey of Italian Households' Income and Wealth. The results show that, firstly, jobless and unstable workers are more likely to end up in temporary contracts. Secondly, there is a significant true state dependence effect of temporary contracts that might be due to the fact that firms are systematically using temporary jobs to face demand uncertainty: loss of motivation and depreciation of human capital due to low firm-specific investments may make temporary workers less likely to jump on stabler job relationships. Moreover, the true state dependence could be related to the presence of a dual labour market, segmented into "bad" and "good" jobs. Thirdly, a significant feedback effect from past temporary jobs to recent unemployment spells has been detected. Therefore, jobless and unstable workers are more likely to end up into temporary relationship generating a loss of human capital, affecting the workers' allocation in the whole economy, and widening the gap between possibly segmented labour markets. The policy maker might be aware of these costs associated to the widespread of temporary jobs and design policies to target those workers suffering most from the trap of temporary positions.
    Keywords: dynamic unobserved effects probit model, feedback effects, individual heterogeneity, temporary employment
    JEL: C23 C25 J29
    Date: 2006–10

This nep-dcm issue is ©2006 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.