nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2008‒09‒20
three papers chosen by
Philip Yu
Hong Kong University

  1. Sequencing Anomalies in Choice Experiments By Brett Day; Jose Luis Pinto Prades
  2. A general theory of time discounting: The reference-time theory of intertemporal choice By Ali al-Nowaihi; Sanjit Dhami
  3. Dynamically Inconsistent Preferences and Money Demand By Emanuele Millemaci; Robert J. Waldmann

  1. By: Brett Day (School of Environmental Sciences, University of East Anglia.); Jose Luis Pinto Prades (Department of Economics, Universidad Pablo de Olavide)
    Abstract: This paper investigates whether responses to choice experiments (CEs) are subject to sequencing anomalies. While previous research has focussed on the possibility that such anomalies relate to position in the sequence of choice tasks, our research reveals that the particular sequence of tasks matters. Using a novel experimental design that allows us to test our hypotheses using robust nonparametric statistics, we observe sequencing anomalies in CE data similar to those recorded in the dichotomous choice contingent valuation literature. Those sequencing effects operate in both price and commodity dimensions and are observed to compound over a series of choice tasks. Our findings cast serious doubt on the current practice of asking each respondent to undertake several choice tasks in a CE whilst treating each response as an independent observation on that individual’s preferences.
    Keywords: Choice experiments; sequencing anomalies; ordering effects; dichotomous choice contingent valuation; non-parametric testing.
    JEL: Q51 C14 I10
    Date: 2008–09
  2. By: Ali al-Nowaihi; Sanjit Dhami
    Abstract: We develop a general theory of intertemporal choice: the reference-time theory, RT. RT is a synthesis of ideas from the hyperbolic model and subadditivity of time discounting. These models are extended to allow for a reference point for time as well as wealth. RT is able to account for all the 6 main anomalies of time discounting: gain-loss asymmetry, magnitude effect, common difference effect, delay-speedup asymmetry, apparent intransitivity of time preferences, and non-additivity of time discounting. We provide a class of utility functions compatible with RT. We show how RT can be extended to incorporate uncertainty and attribute models of intertemporal choice.
    Keywords: Anomalies of the discounted utility model; Hyperbolic discounting; Prospect theory; gamma-delay; alpha-subadditivity; SIE value functions
    JEL: C60 D91
    Date: 2008–09
  3. By: Emanuele Millemaci (Faculty of Economics, University of Rome "Tor Vergata"); Robert J. Waldmann (Faculty of Economics, University of Rome "Tor Vergata")
    Abstract: This paper focuses on two main issues. First, we find that, on average, households’ discount rates decline. This implies dynamically inconsistent preferences. Second, we calculate an indicator of the degree of dynamic inconsistency that may help us to understand how households overcome their self-control problems. We use a micro dataset containing households’ reports on the compensation for receiving hypothetical rewards with delays. We find that individuals with more severely dynamicly inconsistent preferences on average hold a statistically significantly lower share of their total wealth in checking accounts. A possible interpretation is that subjects use precommitment strategies to limit their temptation to consume immediately.
    Keywords: Behavioral Economics, Intertemporal choice, Hyperbolic Discounting, Dynamic Inconsistency, Precommitment
    JEL: D11 D12 D90
    Date: 2008–09–09

This nep-dcm issue is ©2008 by Philip Yu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.