nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2008‒09‒29
three papers chosen by
Philip Yu
Hong Kong University

  1. Equity weights for economic evaluation: An Australian Discrete Choice Experiment, CHERE Working Paper 2008/5 By Richard Norman; Gisselle Gallego
  2. Housing affordability and tenure choices: an empirical investigation By Giaccaria Sergio; Talarico Antonio; Bravi Marina
  3. Measuring changes in preferences and perception due to the entry of a new brand with choice data By Lutz Hildebrandt; Lea Kalweit

  1. By: Richard Norman (CHERE, University of Technology, Sydney); Gisselle Gallego (CHERE, University of Technology, Sydney)
    Abstract: Background: Economic evaluation of healthcare interventions and technologies using the quality-adjusted life year (or life year) usually values outcomes independently of who they accrue to. This is a simplifying assumption relating to the more complex societal preferences. While the premise of equal value has been criticised as being unreflective of societal views, no alternative has gained significant traction. Aims: To identify the trade-offs made by an Australian population between total gain in life expectancy, initial life expectancy, gender, income and smoking status, and then to generate equity weights for economic evaluation from these results. Method: A discrete choice experiment was used in an online panel. 241 respondents answered twelve binary choices, and the results were analysed using logistic regression. Equity weights were then generated using Hicksian compensating variation. Results: A typical individual was willing to discriminate based on smoking and income, but not on gender or initial life expectancy (although the last of these is considered within a narrow range of 55-75 years). However, there was considerable heterogeneity in respondents. Equity weights ranged from 0.673 for smokers with an above average income to 1.207 for non-smokers with a below average income. This result was sensitive to the point at which the marginal utility of time was estimated. Conclusion: Healthcare decision making, using an orthodox QALY model, does not capture the views of society, particularly with regard to smoking or income. We have presented an alternative approach, weighting outcomes dependent on the personal characteristics of the individual receiving them. The feasibility of including this finding in economic evaluation is as yet uncertain and has to be investigated further.
    Keywords: Economic evaluation, discrete choice experiment
    JEL: I10
    Date: 2008–09
  2. By: Giaccaria Sergio (University of Turin); Talarico Antonio; Bravi Marina
    Abstract: Several empirical studies have established that tenure choice and households mobility decisions are highly correlated (Ozyildirim et al., 2005). In the literature, there have been two methods that have used to estimate tenure choice models. The first uses a sample of recent movers while the second employs a sample of all households. Other approaches are mixed (Painter, 2000). This work refers on the results of an empirical analysis, developed to the urban level, by a sample of movers (renters and homeowners). The main goal is to test if homeownership is systematically preferred to leasing and if the housing affordability effect can be estimated by a tenure choice model. A random utility approach is used to model observed choices of renterswithin and between rent and property markets. The analytical results confirm, as expected, the strong trend to the homeownership for the families of renters. But, in current economic situation, the high value of the rent is systematically associated with a reduced chance of changing for the medium-income households. Monetary estimates of affordable rents are given in the last part of the paper, conditioned to the income level, the family size and the previous and actual level of affordability.
    Date: 2008–11
  3. By: Lutz Hildebrandt; Lea Kalweit
    Abstract: Context effects can have a major influence on brand choice behavior after the introduction of a new product. Based on behavioral literature, several hypotheses about the effects of a new brand on perception, preferences and choice behavior can be derived, but studies with real choice data are still lacking. We employ an internal market structure analysis to measure context effects caused by a new product in scanner panel data, and to discriminate between alternative theoretical explanations. An empirical investigation reveals strong support for categorization effects and changes in perception, which affect customers in two out of five segments.
    Keywords: context effects, categorization, brand choice models, new brand introduction
    JEL: M31 C23 C51
    Date: 2008–08

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