nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2007‒10‒27
four papers chosen by
Philip Yu
Hong Kong University

  1. A discrete choice model of dividend reinvestment plans: classification and prediction By Thomas P. Boehm; Ramon P. DeGennaro
  2. Cognitive Constraints, Contraction Consistency, and the Satisficing Criterion By Christopher J. Tyson
  3. Merger Simulation in Mobile Telephony in Portugal By Lukasz Grzybowski; Pedro Pereira;
  4. Network Economics and the Digital Divide in Rural South Asia By Jake Kendall; Nirvikar Singh; Kristin Williams; Yan Zhou; P.D. Kaushik

  1. By: Thomas P. Boehm; Ramon P. DeGennaro
    Abstract: We study 852 companies with dividend reinvestment plans in 1999 matched by total assets to 852 companies without such plans. We use discrete choice methods to predict the classification of these companies. We interpret the misclassified companies as being likely to switch their plan status. That is, if a firm's financial data suggest that a company should have had a dividend reinvestment plan in 1999 but did not, then we expect that it would be more likely to institute a plan than the other companies in the sample. Conversely, if it did have a plan but the financial data suggest that it should not, then we expect that the company would be more likely to drop the plan. We use data from 2004 to explore this conjecture and find evidence supporting it. Our model is an economically and statistically reliable predictor of changes in plan status. We also identify which variables have the most influence on a company's decision whether or not to offer a plan.
    Date: 2007
  2. By: Christopher J. Tyson (Queen Mary, University of London)
    Abstract: A theory of decision making is proposed that offers an axiomatic basis for the notion of “satisficing” postulated by Herbert Simon. The theory relaxes the standard assumption that the decision maker always fully perceives his preferences among the available alternatives, requiring instead that his ability to perceive any given preference be decreasing with respect to the complexity of the choice problem at hand. When complexity is aligned with set inclusion, this exercise is shown to be equivalent to abandoning the contraction consistency axiom of classical choice theory.
    Keywords: Choice function, Perception, Revealed preference, Threshold
    JEL: D01 D11 D80
    Date: 2007–10
  3. By: Lukasz Grzybowski (Competition Commission, UK); Pedro Pereira (Autoridade da Concorrencia);
    Abstract: This article assesses the unilateral effects on prices of a merger in the Portuguese mobile telephony market. We use aggregate quarterly data from 1999 to 2005 and a nested logit model to estimate the price elasticities of demand and the marginal costs of subscription of mobile telephony. Given these estimates, we simulate the effects of the merger. We find that the available mobile telephony subscription products are close substitutes. The merger may cause substantial price increases, even in the presence of large cost efficiencies. On average, prices increase by 7-10% without cost efficiencies, and by about 6-10% with a 10% marginal cost reduction.
    Keywords: lock-in, merger simulation, mobile telephony, nested logit, network effects
    JEL: L13 L43 L93
    Date: 2007–09
  4. By: Jake Kendall (University of California Santa Cruz); Nirvikar Singh (University of California Santa Cruz); Kristin Williams (University of California Santa Cruz); Yan Zhou (California State University, Sacramento); P.D. Kaushik (Rajiv Gandhi Institute of Contemporary Studies)
    Abstract: The concept of a ‘global digital divide’ is now common, and many cross-country studies of determinants of differences in computer and Internet penetration have been performed. The main conclusions and policy implications from these studies are relatively blunt - get richer, have more telephones, and regulate telecommunications better. In this paper, we examine an alternative approach to bridging the digital divide, through organizational innovations that provide low cost Internet access in developing countries, within the existing conditions of income levels, telecommunications infrastructure and regulatory environment. We use survey data from 500 individuals in three South Asian countries, Bangladesh, Nepal and Sri Lanka, to examine factors influencing patterns of computer and Internet use. These individuals were in situations where computer and Internet access has been provided by a developmental agency (government or non-government). We estimate logit and multinomial logit models, using explanatory variables such as income, household size, education, and occupation, as well as infrastructure factors such as quality of electricity supply, and availability of telephones and televisions. Thus we are able to go beyond simple analyses of penetration at the country level, to understand the microeconomics of computer and Internet use in rural South Asia.
    Keywords: IT, ITC, Internet, South Asia, Development, Digital Divide
    JEL: L86 O1
    Date: 2007–09

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