nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2008‒05‒24
four papers chosen by
Philip Yu
Hong Kong University

  1. The Identification & Economic Content of Ordered Choice Models with Stochastic Thresholds By Flavio Cunha; James J. Heckman; Salvador Navarro
  2. Valuing environmental impacts of coastal development projects: a choice modelling application in Spain. By David Hoyos Ramos; Pere Riera Micaló; Javier Fernández Macho; Carmen Gallastegui; Dolores García
  3. Preference Heterogeneity and Habit Persistence: The Case of Breakfast Cereal Consumption By Thunström, Linda
  4. Food Consumption, Paternalism and Economic Policy By Thunström, Linda

  1. By: Flavio Cunha; James J. Heckman; Salvador Navarro
    Abstract: This paper extends the widely used ordered choice model by introducing stochastic thresholds and interval-specific outcomes. The model can be interpreted as a general- ization of the GAFT (MPH) framework for discrete duration data that jointly models durations and outcomes associated with different stopping times. We establish con- ditions for nonparametric identification. We interpret the ordered choice model as a special case of a general discrete choice model and as a special case of a dynamic discrete choice model.
    Keywords: example keyword,example keyword, example keyword
    JEL: C31
    Date: 2007–07–16
  2. By: David Hoyos Ramos (Unidad de Economía Ambiental - Instituto de Economía Pública); Pere Riera Micaló (Universidad Autónoma de Barcelona); Javier Fernández Macho (Departamento de Economía Aplicada III); Carmen Gallastegui (Institute for Public Economics. University of the Basque Country); Dolores García (Departament d’Economia Aplicada. Universitat de les Illes Balears)
    Abstract: Developmental monetary benefits of coast artificialisation projects are rarely confronted with the environmental benefits that its conservation may entail. As a consequence, policy-makers often face decision making processes in which monetary benefits have to be balanced with physical impacts ending up in undervaluation or overvaluation of environmental aspects. Non-market valuation of coastal and marine resources is thus a growing concern in the assessment of cost-benefit analysis of coastal developmental projects. This paper attempts to estimate the effects on people’s utility of the potential environmental impacts of a new seaport in Pasaia, Spain. A choice modelling technique is proposed as a means of estimating marginal impacts for different environmental attributes of mount Jaizkibel, namely its landscape, flora, avifauna and seabed. The results from a multinomial logit model reveal that, on average, individuals would pay 1.39 euros for a one percentage protection of its landscape; 0.87 euros for protecting its flora; 0.68 euros for protecting its avifauna; and 0.63 euros for protecting its seabed.
    Keywords: choice modelling; environmental valuation; social welfare
    JEL: Q51
    Date: 2008–05–19
  3. By: Thunström, Linda (Department of Economics, Umeå University)
    Abstract: This paper estimates the strength and heterogeneity across households in state dependence associated with breakfast cereal consumption, where positive state dependence implies habit persistence and negative state dependence implies variety-seeking in consumption. The analysis relies on a discrete choice model and finds that breakfast cereal consumption is generally highly habitual, but the degree of habit persistence exhibits heterogeneity across households. In addition, some households can be characterized as variety-seeking. The strength of habit persistence is similar across income and educational groups. The strength of habit persistence seems to be weaker for households with several adults and children compared to one-adult-households.
    Keywords: consumer choice; habit persistence; food consumption; preference heterogeneity
    JEL: C35 D12
    Date: 2008–05–15
  4. By: Thunström, Linda (Department of Economics, Umeå University)
    Abstract: The thesis consists of a summary and four papers, concerned with food consumption, behavior associated with overconsumption of food and analysis of the economic policy reforms designed to improve health. <p> Paper [I] estimates a hedonic price model on breakfast cereal, crisp bread and potato product data. The purpose is to examine the marginal implicit prices for food characteristics associated with health. A trade-off exists between health and taste. For instance, sugar, salt and fat are tasty but can be unhealthy if overconsumed; whereas fiber is unhealthy if underconsumed. If the marginal implicit price for sugar is negative, consumers value health over its taste. Our results are the marginal implicit price for sugar is negative for breakfast cereals and crisp bread—consumers value health over the taste of sugar. For salt, we find the opposite—a positive marginal implicit price, suggesting people value its taste over health. For fat, we find a negative marginal implicit price of fat in breakfast cereals and potato products containing salt, whereas we find a positive marginal implicit price of fat in hard bread and potato products that contain no salt. For the one healthy characteristic, fiber, we find a negative marginal implicit price in breakfast cereals and a positive implicit price in hard bread. <p> Paper [II] uses a general equilibrium model to derive the optimal policy if people overconsume unhealthy food due to self-control problems. Individuals lacking self-control have a preference for immediate gratification, at the expense of future health. We show the optimal policy to help individuals with self-control problems to behave rationally is a combination of subsidies for the health capital stock and the physical capital stock. <p> Paper [III] estimates a demand system for grain consumption based on household panel data and detailed product characteristics, and simulate the effect on grain consumption of economic policy reforms designed to encourage a healthier grain diet. Our results imply it is more cost-efficient to subsidize the fiber content than to subsidize products rich in fiber given the goal to increase the fiber intake of the average Swedish household. Our results also imply subsidies alone give rise to an increase in fiber, and to other unhealthy nutrients. Also, subsidies alone have negative effects on the budget. We therefore simulate the effect of policy reforms in which the subsidies are funded either by taxes on the content of unhealthy nutrients or by taxes on products that are overconsumed. Our results suggest that price instruments need to be substantial to change consumption. For instance, removing the VAT on products rich in fiber has little effect on consumption. <p> Paper [IV] explores habit persistence in breakfast cereal purchases. To perform the analysis, we use a mixed multinomial logit model, on household panel data on breakfast cereal purchases. If habit persistence in consumption is strong, short and long-run responses to policy reforms will differ. Our results are breakfast cereal purchases are strongly associated with habit persistence. Our results also imply preferences for breakfast cereals are heterogeneous over households and the strength of habit persistence is similar over educational and income groups.
    Keywords: food consumption; food characteristics; health; willingness-to-pay; habit persistence; preference heterogeneity; taxation; subsidies; quasi-hyperbolic discounting
    JEL: C35 D10 D12 D61 D62 H21 H23 I10 I18
    Date: 2008–05–15

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