nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2008‒05‒17
four papers chosen by
Philip Yu
Hong Kong University

  1. How are Preferences Revealed? By John Beshears; James J. Choi; David Laibson; Brigitte C. Madrian
  2. Informing Efficient and Effective Solid Waste Management to Improve Local Environmental Quality and Public Health: Application of the Choice Experiment Method in West Bengal, India By Sukanya Das; Ekin Birol; ARabindra N. Bhattacharya
  3. Giving or Taking: The Role of Dispositional Power Motivation and Positive Affect in Profit Maximization? By Markus Quirin; Martin Beckenkamp; Julius Kuhl
  4. The Role of Experienced Regret on Intertemporal Choice: An Experiment By Daniela Raeva; Luigi Mittone; Jens Schwarzbach

  1. By: John Beshears; James J. Choi; David Laibson; Brigitte C. Madrian
    Abstract: Revealed preferences are tastes that rationalize an economic agent’s observed actions. Normative preferences represent the agent's actual interests. It sometimes makes sense to assume that revealed preferences are identical to normative preferences. But there are many cases where this assumption is violated. We identify five factors that increase the likelihood of a disparity between revealed preferences and normative preferences: passive choice, complexity, limited personal experience, third- party marketing, and intertemporal choice. We then discuss six approaches that jointly contribute to the identification of normative preferences: structural estimation, active decisions, asymptotic choice, aggregated revealed preferences, reported preferences, and informed preferences. Each of these approaches uses consumer behavior to infer some property of normative preferences without equating revealed and normative preferences. We illustrate these issues with evidence from savings and investment outcomes.
    JEL: A11 B4 D01 D60 G11 H1
    Date: 2008–05
  2. By: Sukanya Das (Jadavpur University, Kolkata, India); Ekin Birol (Markets, Trade, and Institutions Division; International Food Policy Research Institute 2033 K St, NW; Washington, DC 20006, USA); ARabindra N. Bhattacharya (Centre for Studies in Social Sciences, Kolkata, India)
    Abstract: In this paper we employ the choice experiment method to estimate residents’ willingness to pay (WTP) for improvements in the solid waste management (SWM) services provided in Chandernagore and South Dum Dum municipalities of Greater Kolkata in West Bengal, India. 101 randomly selected residents took part in a choice experiment survey. Data are analysed with conditional logit, random parameter logit and random parameter logit with interactions models. The best fitting random parameter logit with interactions model reveal that there is significant conditional and unconditional heterogeneity in residents’ preferences for improvements in SWM services. The results reveal that on average residents of these municipalities are WTP significant amounts, in terms of higher monthly municipality taxes, to increase the frequency of waste collection, and to ensure that the waste is collected by covered trucks. Differences in WTP values across residents, however, should be taken into consideration to ensure social equity. The results reported in this paper have important policy implications for informing efficient, effective and equitable SWM services aimed at reducing local environmental pollution and the consequent public health risks.
    Keywords: Municipal solid waste management, choice experiment, conditional logit model, random parameter logit model, interactions, preference heterogeneity, India
    Date: 2008
  3. By: Markus Quirin (University of Osnabrueck); Martin Beckenkamp (Max Planck Institute for Research on Collective Goods); Julius Kuhl (University of Osnabrueck)
    Abstract: Socio-economic decisions are commonly explained by rational cost vs. benefit considerations, whereas person variables have not usually been considered. The present study aims at investigating the degree to which dispositional power motivation and affective states predict socio-economic decisions. The power motive was assessed both indirectly and directly using a TAT-like picture test and a power motive self-report, respectively. After nine months, 62 students completed an affect rating and performed on a money allocation task (Social Values Questionnaire). We hypothesized and confirmed that dispositional power should be associated with a tendency to maximize one’s profit but to care less about another party’s profit. Additionally, positive affect showed effects in the same direction. The results are discussed with respect to a motivational approach explaining socio-economic behaviour.
    Keywords: economic decision-making, rational choice theory, personality, implicit power motive, positive affect, operant motive test
    JEL: C91 D01 Z13
    Date: 2008–04
  4. By: Daniela Raeva; Luigi Mittone; Jens Schwarzbach
    Abstract: Theoretical and empirical body of research have exposed the powerful role of experiencing regret in guiding choice behavior. In this paper, we examined the impact of experienced regret (and rejoicing) induced by a feedback provided on a risk decision prior to a two-period intertemporal choice (i.e. decision-unrelated experienced regret). To our knowledge, this is the first attempt to bring together experienced regret and choice over time.We used the two-component discounted utility model approach as a framework. We applied previous research findings on the effect of experienced regret on utility, and we performed an experiment to test whether experienced decision-unrelated regret and rejoicing have an impact on the discount factor. We found that both experienced decisionunrelated regret and rejoicing have an impact on the way people discount future: when regret is experienced the discount factor decreases, whereas when rejoicing is experienced the discount factor increases.
    Keywords: intertemporal choice, regret theory
    JEL: A12 C91 D91
    Date: 2008

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