nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2008‒02‒23
five papers chosen by
Philip Yu
Hong Kong University

  1. Does FDI in Manufacturing Cause FDI in Business Services? Evidence from French Firm-Level Data By Benjamin Nefussi; Cyrille Schwellnus
  2. Value of Time by Time of Day: A Stated-Preference Study By Yin-yen Tseng; Erik Verhoef
  3. Ignoring attributes in choice experiments By Carlsson, Fredrik; Kataria, Mitesh; Lampi, Elina
  4. Product innovation and imitation in a duopoly with differentiation by attributes By Reynald-Alexandre Laurent
  5. Location choices of multinational firms in Europe: the role of EU cohesion policy By Roberto Basile; Davide Castellani; Antonello Zanfei

  1. By: Benjamin Nefussi; Cyrille Schwellnus
    Abstract: This paper uses a large French firm-level dataset to evaluate the determinants of location choices in services. In a first step, estimates for four broad services sectors are compared with the estimates for the manufacturing sector in a gravity type of framework. Using a discrete choice model it is found that this framework does fairly well in explaining location choices in services and that the parameter estimates for services are close to the ones for manufacturing. It is then investigated whether the similarity in estimated parameters is due to a complementarity between location choices in manufacturing and in services, in the sense that manufacturing location choices may cause the location of services. A particularly appropriate services sector for this purpose is the business services sector for which input-output linkages with the manufacturing sector are particularly strong. It is found that the downstream demand of French manufacturing firms has a positive effect on the location choice probabilities of French business services firms. This effect is robust to controlling for unobserved determinants of the choice probabilities that may possibly be correlated with the downstream demand variable.
    Keywords: FDI; services; gravity model; discrete choice model; international firms; international trade models and databases
    JEL: F13 F15 L80
    Date: 2007–12
  2. By: Yin-yen Tseng (VU University Amsterdam); Erik Verhoef (VU University Amsterdam)
    Abstract: This paper proposes an alternative, dynamic framework for estimating time-varying values of travel time savings and values of schedule delay, in which time-preferences are represented as the time-varying excess willingness to pay (EWPT) to being in the one location, over being elsewhere. It is shown how the conventional linear model, with time-independent values of travel time savings and schedule delay costs, is a special case of our model, and that it is implausible particularly in that it implicitly assumes that the willingness to pay for spending a minute at home instead of being in the vehicle does not vary by time of day, even not for very early departures. The framework is applied to SP data representing the respondents departure time choices for the morning commute. The results suggest that individuals time-related shadow prices indeed vary strongly over the morning peak, and values of travel time savings are consequently strongly time-dependent, following plausible and intuitive patterns.
    Keywords: Value of Travel Time Savings; Value of Schedule Delay; Value of Unreliability; Stated Choice
    JEL: R41 D12
    Date: 2007–08–24
  3. By: Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University); Kataria, Mitesh (Department of Policy Analysis, National Environmental Research Institute); Lampi, Elina (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: In this paper we use follow-up questions to investigate whether attributes have been ignored in a choice experiment on environmental goods. This information is subsequently used in the estimation of the model by restricting the individual parameters for the ignored attributes to zero. We then separately estimate the marginal willingness to pay (WTP) for the whole sample and for those who took all attributes into account. We find no significant differences in mean marginal WTP between these two models. However, when taking the shares of respondents who considered both the environmental and the cost attributes (52 -69 percent of the respondents) into account, then the marginal WTPs for each attribute change if the respondents who ignored the attributes have a zero WTP. Hence, not taking into account whether respondents have considered the attribute could give biased welfare estimates and wrong policy implications. We also investigate whether any socioeconomic characteristics can explain who ignores attributes, and find that very few of the variables are significant, indicating that we can only partly explain the behavior.<p>
    Keywords: Choice experiment; WTP; ignoring attributes; follow-up question
    JEL: D61 Q50 Q51
    Date: 2008–02–20
  4. By: Reynald-Alexandre Laurent
    Abstract: This paper considers a probabilistic duopoly in which products are described by their specific attributes, this form of differentiation embodying the horizontal and vertical dimensions. Consumers make discrete choices and follow a random decision rule based on these attributes. A three-stage game is studied in which firms develop new attributes for their products (innovation), then may imitate the attributes of the competing product and finally compete in price. At the equilibrium, the firm selling the less appreciated product is generally incited to imitate its rival. Confronted to a threat of imitation, the benchmark firm sometimes decreases strategically its attribute index in order to diminish its unit cost of innovation and the differentiation on the market, deterring the imitation in this way. This strategy is efficient when imitation costs are sufficiently concave. In the opposite case, it is preferable for the benchmark firm to accept the imitation. Thus, according to the shape of imitation costs, equilibria with "deterrence" or with "accommodation" occur, completing the current typology of strategic responses to a threat of imitation.
    Date: 2008
  5. By: Roberto Basile; Davide Castellani; Antonello Zanfei
    Abstract: In this paper we examine the determinants of location choices of multinational firms in Europe. In particular, we focus on the role of EU Cohesion Policy in attracting foreign investors from both within and outside Europe. Using data on 5,509 foreign subsidiaries established in 50 regions in 8 EU countries over the period 1991-1999, we estimate a mixed logit model of the determinants of MNFs’ location choices. We find that, after controlling for the role of agglomeration economies as well as a number of other regional and country characteristics and allowing for a very flexible correlation pattern among choices, Structural and Cohesion funds allocated by the EU to laggard regions have indeed contributed to attracting multinationals. These policies as well as other determinants play a different role in the case of European investors as opposed to non European ones.
    Keywords: Europe; Foreign Direct Investments; Location Choice; Mixed Logit Models
    JEL: F23 O52 R30
    Date: 2007–04–31

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