nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2008‒03‒01
four papers chosen by
Philip Yu
Hong Kong University

  1. Effect of US Policies on Offshore Oil Leasing, 1983-2006: A Random Parameter Logit Regression Analysis By Brett R. Gelso; John C. Whitehead
  2. Referendum Design, Quorum Rules and Turnout By Luís Aguiar-Conraria; Pedro C. Magalhães
  3. An empirical analysis of Mexican merger policy By De Hoyos, Rafael E.; Avalos, Marcos
  4. A Test of the Rational Expectations Hypothesis using data from a Natural Experiment By Anna Conte; Peter G. Moffatt; Fabrizio Botti; Daniela Di Cagno; Carlo D'Ippoliti

  1. By: Brett R. Gelso; John C. Whitehead
    Abstract: The purpose of this study is to determine the effects of Minerals Management Service policy on Outer Continental Shelf leasing between 1983 and 2006. We apply a discrete choice model to a large, recently-developed spatial data set and focus on the effect of increased royalties on offshore production. We focus on offshore policies subsequent to 1983 with a flexible Random Parameters Logit model. Oil prices, net income, distance, geographical proxies and weather variables influence bidding in expected ways. We include the second moment of parameter distributions to avoid erroneous conclusions about the effects of government policy on bidding. Key Words: Random Parameter Logit, Oil Policy, Outer Continental Shelf
    Date: 2008
  2. By: Luís Aguiar-Conraria (Universidade do Minho - NIPE); Pedro C. Magalhães (University of Lisbon, Social Sciences Institute,)
    Abstract: What is the impact of different referenda designs on the willingness of the electorate to vote? In this article, we focus on quorum requirements. We use a rational choice-voting model to demonstrate that certain types of quorum requirements change the incentives each elector faces. In particular, participation quorums induce electors who oppose changes in the status quo and expect to be in the minority to abstain rather than vote. As a result, such quorums decrease turnout. We test this model prediction using data for all referendums held in current European Union countries from 1970 until 2007. We show that that the existence of participation quorums does increase abstention by 10 percentage points.
    Date: 2008
  3. By: De Hoyos, Rafael E.; Avalos, Marcos
    Abstract: A newly created dataset including 239 decisions made by the Mexican Federal Competition Commission on horizontal mergers between 1997 and 2001 is used to estimate the different factors affecting the Commission ' s resolution. The paper approximates the decision making process using two different discrete choice models. The results indicate that, contrary to the Commission ' s objective, the presence of efficiency gains increases the probability of a case being issued. The findings also show that factors different from the ones explici tly mentioned by the Commission have a significant effect on the Commission ' s final decision. In particular, the presence of a foreign company among the would-be merger firms significantly increases the likelihood of observing an allowed merger.
    Keywords: Microfinance,Economic Theory & Research,Labor Policies,Bankruptcy and Resolution of Financial Distress,Corporate Law
    Date: 2008–02–01
  4. By: Anna Conte (Department of Economic and Business Sciences, LUISS Guido Carli); Peter G. Moffatt (School of Economics, University of East Anglia); Fabrizio Botti (Department of Economic and Business Sciences, LUISS Guido Carli); Daniela Di Cagno (Department of Economic and Business Sciences, LUISS Guido Carli); Carlo D'Ippoliti (Department of Economic and Business Sciences, LUISS Guido Carli)
    Abstract: Data on contestantsÕ choices in Italian Game Show Affari Tuoi are analysed in a way that separates the effect of risk attitude from that of beliefs concerning the amount of money that will be offered to contestants in future rounds. The importance of belief-formation is confirmed by the estimation of a mixture model which establishes that the vast majority of contestants are forward-looking as opposed to myopic. The most important issue addressed in the paper is what belief function is actually being used by contestants. This function is estimated in an unconstrained way as a component of the choice model, which is estimated using maximum simulated likelihood. Separate identification of the belief function and preferences is possible by virtue of the fact that at a certain stage of the game, beliefs are not relevant, and risk attitude is the sole determinant of choice. The rational expectations hypothesis is tested by comparing the estimated belief function with the ÒtrueÓ offer function which is estimated using data on offers actually made to contestants. We find that there is a significant difference between these two functions, and hence we reject the rational expectations hypothesis. However, when a simpler Òrule-of-thumbÓ structure is assumed for the belief function, we find a correspondence to the function obtained from data on actual offers. Our overall conclusion is that contestants are rational to the extent that they make use of all available relevant information, but are not fully rational because they are not processing the information in an optimal way. The importance of allowing the choice data to convey the belief function without prejudice is emphasised.
    Keywords: beliefs, discrete choice models, simulated likelihood, natural experiments, rational expectations, risky choices
    JEL: C15 C23 C25 D81
    Date: 2007–08

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