nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2009‒05‒16
seven papers chosen by
Philip Yu
Hong Kong University

  1. Land Use Change: A Spatial Multinomial Choice Analysis By Carrion-Flores, Carmen E.; Flores-Lagunes, Alfonso; Guci, Ledia
  2. An Analysis of Rank Ordered Data By Paudel, Krishna P.; Poudel, Biswo N.; Dunn, Michael A.; Pandit, Mahesh
  3. Nonparametric vs parametric binary choice models: An empirical investigation By Bontemps, Christophe; Racine, Jeffrey S.; Simioni, Michel
  4. Empirical Analysis of Land-use Change and Soil Carbon Sequestration Cost in China By Li, Man; Wu, JunJie; Deng, Xiangzheng
  5. Estimating Mixed Logit Recreation Demand Models With Large Choice Sets By Domanski, Adam
  6. Retail and Wholesale Market Power in Organic Foods By Richards, Timothy J.; Acharya, Ram; Molina, Ignacio
  7. Benefit Evaluation of the Country of Origin Labeling in Taiwan: Results from Auction Experiment By Chern, Wen S.; Chang, Chun-Yu

  1. By: Carrion-Flores, Carmen E.; Flores-Lagunes, Alfonso; Guci, Ledia
    Abstract: Urban decentralization and dispersion trends have led to increased conversion of rural lands in many urban peripheries and exurban regions of the U.S. The growth of the exurban areas has outpaced growth in urban and suburban areas, resulting in growth pressures at the urban-rural fringe. A thorough analysis of land use change patterns and the ability to predict these changes are necessary for the effective design of regional environmental, growth, and development policies. We estimate a multinomial discrete choice model with spatial dependence using parcel-level data from Medina County, Ohio. Accounting for spatial dependence should result in improved statistical inference about land use changes. Our spatial model extends the binary choice âlinearized logitâ model of Klier and McMillen (2008) to a multinomial setting. A small Monte Carlo simulation indicates that this estimator performs reasonably well. Preliminary results suggest that the location of new urban development is guided by a preference over lower density areas, yet in proximity to current urban development. In addition, we find significant evidence of spatial dependence in land use decisions.
    Keywords: Land Use Change, Multinomial Logit, Spatial Dependence, Community/Rural/Urban Development, Land Economics/Use, Research Methods/ Statistical Methods, R14, C21, C25,
    Date: 2009
  2. By: Paudel, Krishna P.; Poudel, Biswo N.; Dunn, Michael A.; Pandit, Mahesh
    Abstract: Many methods are available to analyze rank ordered data. We used a spectral density method to analyze Formosan subterranean termite control options ranked by Louisiana homeowners. Respondents are asked to rank termite control options from the most preferred to the least preferred option. Spectral analysis results indicated that the most preferred termite control choice is a relatively cheap ($0.13 per square foot) option of liquid treatment.
    Keywords: FST, rank ordered data, spectral analysis, Research Methods/ Statistical Methods,
    Date: 2009
  3. By: Bontemps, Christophe; Racine, Jeffrey S.; Simioni, Michel
    Abstract: The estimation of conditional probability distribution functions (PDFs) in a kernel nonparametric framework has recently received attention. As emphasized by Hall, Racine and Li (2004), these conditional PDFs are extremely useful for a range of tasks including modelling and predicting consumer choice. The aim of this paper is threefold. First, we implement nonparametric kernel estimation of PDF with a binary choice variable and both continuous and discrete explanatory variables. Second, we address the issue of the performances of this nonparametric estimator when compared to a classic on-the-shelf parametric estimator, namely a probit. We propose to evaluate these estimators in terms of their predictive performances, in the line of the recent "revealed performance" test proposed by Racine and Parmeter (2009). Third, we provide a detailed discussion of the results focusing on environmental insights provided by the two estimators, revealing some patterns that can only be detected using the nonparametric estimator.
    Keywords: Binary choice models, Nonparametric estimation, specification test, tap water demand, Research Methods/ Statistical Methods,
    Date: 2009–05
  4. By: Li, Man; Wu, JunJie; Deng, Xiangzheng
    Abstract: This project examines the driving forces behind the land-use change and evaluates the effects of land-use transition on soil organic carbon density and sequestration cost in China. It contributes to the literature in three aspects. First, it applies a discrete choice method to model multiple land-use options with a unique set of high-quality data. Second, it conducts a comprehensive analysis of biophysical characteristics and changes in soil carbon storage caused by land-use change. Third, it examines the economic efficiency of alternative land use policies as instruments for carbon sequestration in China.
    Keywords: carbon sequestration, land-use, soil organic carbon density, China, Environmental Economics and Policy, Land Economics/Use,
    Date: 2009
  5. By: Domanski, Adam
    Abstract: Discrete choice models are widely used in studies of recreation demand. They have proven valuable when modeling situations where decision makers face large choice sets and site substitution is important. However, when the choice set faced by the individual becomes very large (on the order of hundreds or thousands of alternatives), computational limitations make estimation with the full choice set intractable. Sampling of alternatives in a conditional logit framework is an effective method to limit computational burdens while still producing consistent estimates. This method is allowed by the existence of the independence of irrelevant alternatives (IIA) assumption. More advanced mixed logit models account for unobserved preference heterogeneity and overcome the behavioral limitations of the IIA assumption, however in doing so, prohibit sampling of alternatives. A method is developed where a latent class (finite mixture) model is estimated via the expectations-maximization algorithm and in doing so, allows consistent sampling of alternatives in a mixed logit model. The method is tested and applied to a recreational demand Wisconsin fishing survey.
    Keywords: Sampling of alternatives, discrete choice, mixed logit, conditional logit, recreational demand, Wisconsin, fishing, microeconometrics, Environmental Economics and Policy, Research Methods/ Statistical Methods,
    Date: 2009
  6. By: Richards, Timothy J.; Acharya, Ram; Molina, Ignacio
    Abstract: The demand for organic fresh fruits and vegetable continues to grow at a rate far higher than the rest of the produce industry. The cost of meeting organic certification standards, however, has meant that supply has been slow to adjust. With limited supply, we hypothesize that organic suppliers enjoy more market power in bargaining over their share of the retail-production cost margin for fresh apples. We test this hypothesis using a random parameters, generalized extreme value demand model (mixed logit) combined with a structural model of retail and wholesale pricing that allows conduct to vary by product attributes (organic or non-organic) and time. We find that organic growers do indeed earn a larger share of the total margin than non-organic growers, but this vertical market power is eroding over time as market supply adjusts.
    Keywords: organics, market power, mixed logit, game theory, non-linear pricing., Industrial Organization, C35, D12, D43, L13, L41, Q13.,
    Date: 2009
  7. By: Chern, Wen S.; Chang, Chun-Yu
    Abstract: This research is aimed at investigating the consumerâs preference for food produced in Taiwan and the economic benefits for the country of origin labeling. The study uses both experimental auction and contingent valuation method (CVM) to investigate factors that affect the consumerâs willingness to pay (WTP) for products under country-of-origin labeling (COOL). Experimental auctions of Taiwan and China preserved olives as well as Taiwan, China and Vietnam oolong teas were conducted using the Vickreyâs second price sealed bid auction. For CVM, the study used the double-bounded dichotomous choice method in which we started assuming the same base price for all products in the first question and then varied the prices in the second CV question. The products not chosen in the first question were offered with a discount in a range from 10% to 50% in the following question. Based on auction data, the Tobit model shows that the estimated premiums are 58.1%, 78.15% and 98.13% for Taiwan products over their alternatives of China olives, China oolong tea, and Vietnam oolong tea, respectively. Based on the CVM, the estimated premiums for Taiwan over China olives from a Logit model is 67%, and the premiums for Taiwan produced oolong tea should lie between 50% to an unknown upper bound over China and Vietnam alternatives as the Multinomial Logit model cannot be successfully estimated due to too few choice switches with discounted prices. The study thus demonstrates the superiority of the experimental auction over the CVM in eliciting the WTP for foods produced in Taiwan. The study concludes that enacting a COOL law would increase economic benefits to consumers in Taiwan, and at the same time, placing the imported products in the level playing field.
    Keywords: country-of-origin labeling, experimental auction, Tobit model, contingent valuation method, logit model, multinomial logit model, willingness to pay, Agricultural and Food Policy, Consumer/Household Economics, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Q13, D12.,
    Date: 2009–05

This nep-dcm issue is ©2009 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.