nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2007‒03‒03
five papers chosen by
Philip Yu
Hong Kong University

  1. Discrete Choice Modeling By William Greene
  2. Modelling the Joint Access Mode and Railway Station Choice By Ghebreegziabiher Debrezion; Eric Pels; Piet Rietveld
  3. Noise and Bias in Eliciting Preferences By John D Hey; Andrea Morone; Ulrich Schmidt
  4. Slippery slopes of stress : ordered failure events in German banking By Kick, Thomas; Koetter, Michael
  5. Insurance and Rural Welfare: What can Panel Data tell us? By Chris Elbers; Jan Willem Gunning; Lei Pan

  1. By: William Greene
    Date: 2007
  2. By: Ghebreegziabiher Debrezion (Vrije Universiteit Amsterdam); Eric Pels (Vrije Universiteit Amsterdam); Piet Rietveld (Vrije Universiteit Amsterdam)
    Abstract: This study models the choices of Dutch railway users (aggregated at the 4 digit post code area) for access mode and departure railway stations. For each post code area a set of four access modes: car, public transport, bicycle and walking and a set three departure railway stations are identified. A nested logit model is estimated based on 1440 post code areas using a number of access and rail station features. The access features include distance to the departure station, car ownership level, public transport frequency and travel time by public transport to the departure stations. The station features used in the estimation include rail service quality index and supplementary facilities such as availability of parking space and bicycle standing place. Distance has a negative effect on the utility of departure stations. A steeper effect is observed on the choice of departure stations accessed by the non-motorized modes of walking and bicycle. Availability of parking places and bicycle standing areas have a positive effect on the choice of departure railway stations accessed by car and bicycle respectively. Public transport frequency has a positive whereas public transport travel time has a negative effect on the choice of departure stations accessed by public transport. The rail service quality index of a station has a significant and positive effect on the choice of departure stations accessed by all modes.
    Keywords: departure railway station choice; access mode choice; nested logit model
    JEL: R2 R4
    Date: 2007–01–26
  3. By: John D Hey; Andrea Morone; Ulrich Schmidt
    Abstract: In the context of eliciting preferences for decision making under risk, we ask the question: "which might be the 'best' method for eliciting such preferences?". It is well known that different methods differ in terms of the bias in the elicitation; it is rather less well-known that different methods differ in terms of their noisiness. The optimal trade-off depends upon the relative magnitutdes of these two effects. We examine four different elicitation mechanisms (pairwise choice, willingness-to-pay, willingness-to-accept, and certainty equivalents) and estimate both effect. Our results suggest that economists might be better advised to use what appears to be a relatively inefficient elicitation technique (i.e. pairwise choice) in order to avoid trhe bias in better-known and more widely-used techniques.
    Keywords: Pairwise choice, willingness-to-pay, willingness-to-accept, errors, noise, biases
    JEL: C91 C81
    Date: 2007–02
  4. By: Kick, Thomas; Koetter, Michael
    Abstract: Outright bank failures without prior indication of financial instability are very rare. Supervisory authorities monitor banks constantly. Thus, they usually obtain early warning signals that precede ultimate failure and, in fact, banks can be regarded as troubled to varying degrees before outright closure. But to our knowledge virtually all studies that predict bank failures neglect the ordinal nature of bank distress. Exploiting the distress database of the Deutsche Bundesbank we distinguish four different distress events that banks experience. Only the worst entails a bank to exit the market. Weaker orders of distress are, first, compulsory notifications of the authorities about potential problems, second, corrective actions such as warnings and hearings and, third, actions by banking pillar's insurance schemes. Since the four categories of hazard functions are not proportional, we specify a generalized ordered logit model to estimate the respective probabilities of distress simultaneously. Our model estimates each set of probabilities with high accuracy and conrms, first, the necessity to account for different kinds of distress events and, second, the violation of the proportional odds assumption implicit in most limited dependent analyses of bank failure.
    Keywords: Bank, failure, distress, generalized ordered logit
    JEL: C35 G21 G33 K23 L50
    Date: 2007
  5. By: Chris Elbers (Vrije Universiteit Amsterdam); Jan Willem Gunning (Vrije Universiteit Amsterdam); Lei Pan (Vrije Universiteit Amsterdam)
    Abstract: Assessing the scope for insurance in rural communities usually requires a structural model of household behavior under risk. One of the few empirical applications of such models is the study by Rosenzweig and Wolpin (1993) who conclude that Indian farmers in the ICRISAT villages would not benefit from the introduction of formal weather insurance. In this paper we investigate how models such as theirs can be estimated from panel data on production and assets. We show that if assets can take only a limited number of values the coefficients of the model cannot be estimated with reasonable precision. We also show that this can affect the conclusion that insurance would not be welfare improving.
    Keywords: Structural estimation; discrete choices; insurance
    JEL: C51 D91
    Date: 2007–01–26

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