nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2009‒11‒14
five papers chosen by
Philip Yu
Hong Kong University

  1. On the equivalence of location choice models: conditional logit, nested logit and poisson By Kurt Schmidheiny; Marius Brülhart
  2. Dealing with ignored attributes in choice experiments on valuation of Sweden's environmental quality objectives By Fredrik Carlsson; Mitesh Kataria; Elina Lampi
  3. How Sensitive Are Retirement Decisions to Financial Incentives: A Stated Preference Analysis By Voňková, Hana; van Soest, Arthur
  4. Dynamic Female Labor Supply By Eckstein, Zvi; Lifshitz, Osnat
  5. Inertia, Interaction and Clustering in Demand By Babutsidze, Zakaria; Cowan, Robin

  1. By: Kurt Schmidheiny (Universitat Pompeu Fabra); Marius Brülhart (Université de Lausanne)
    Abstract: It is well understood that the two most popular empirical models of location choice-conditional logit and Poisson - return identical coefficient estimates when the regressors are not individual specific. We show that these two models differ starkly in terms of their implied predictions. The conditional logit model represents a zero-sum world, in which one region's gain is the other regions' loss. In contrast, the Poisson model implies a positive-sum economy, in which one region's gain is no other region's loss. We also show that all intermediate cases can be represented as a nested logit model with a single outside option. The nested logit turns out to be a linear combination of the conditional logit and Poisson models. Conditional logit and Poisson elasticities mark the polar cases and can therefore serve as boundary values in applied research.
    Keywords: firm location, residential choice, conditional logit, nested logit, Poisson count model
    JEL: C25 R3 H73
    Date: 2009
  2. By: Fredrik Carlsson (Department of Economics, University of Gothenburg); Mitesh Kataria (Max Planck Institute of Economics, Strategic Interaction Group); Elina Lampi (Department of Economics, University of Gothenburg)
    Abstract: Using a choice experiment, this paper investigates how Swedish citizens value three environmental quality objectives. In addition, a follow-up question is used to investigate whether respondents ignored any attributes when responding. The resulting information is used in the model estimation by restricting the individual parameters for the ignored attributes to zero. When taking the shares of respondents who considered both the environmental and the cost attributes (52-69 percent of the respondents) into account, then the WTPs for each attribute change if the respondents who ignored the attributes have a zero WTP. At the same time, we find evidence that not all respondents who claimed to have ignored an attribute really did. However, the most commonly ignored non-monetary attributes always have the lowest rankings in terms of WTP across all three environmental objectives. Thus, our results show that instead of ignoring, respondents seem to put less weight on the attributes they claimed to have ignored.
    Keywords: Choice experiment, environmental quality objectives, follow-up question,
    JEL: D61 Q50 Q51
    Date: 2009–11–02
  3. By: Voňková, Hana (Tilburg University); van Soest, Arthur (Tilburg University)
    Abstract: We study effects of financial incentives on the retirement age using stated preference data. Dutch survey respondents were given hypothetical retirement scenarios describing age(s) of (partial and full) retirement and replacement rate(s). A structural model is estimated in which utility is the discounted sum of within period utilities that depend on employment status and income. Parameters of the utility function vary with observed and unobserved characteristics. Simulations show that the income and substitution effects of pensions as a function of the retirement age are substantial and larger than according to studies using data on actual retirement decisions.
    Keywords: pensions, flexible retirement, gradual retirement, stated choices
    JEL: J22 J26 C81
    Date: 2009–10
  4. By: Eckstein, Zvi (Tel Aviv University); Lifshitz, Osnat (Academic College of Tel-Aviv Yaffo)
    Abstract: The increase in female employment and participation rates is one of the most dramatic economic changes to have taken place during the last century. However, while the employment rate of married women more than doubled during the last fifty years, that of unmarried women remained almost constant. In order to empirically analyze these trends we divide the paper into two parts: In the first, we empirically estimate a traditional female dynamic labor supply model using an extended version of Eckstein and Wolpin (1989) in order to compare the various explanations in the literature for the observed trends. The main finding is that the rise in education levels accounts for about one-third of the increase in female employment while about 40 percent remains unexplained by observed household characteristics. We show that this unexplained portion can be empirically attributed to changes in preferences or the costs of childrearing and household maintenance. In the second part, we formulate and estimate a new framework for the couple intra-family game that is then used to analyze the household dynamic labor supply. We find that female labor supply may have increased significantly due to a change in the form of the household game.
    Keywords: dynamic discrete choice, female employment, accounting, household game
    JEL: E24 J2 J3
    Date: 2009–11
  5. By: Babutsidze, Zakaria (UNU-MERIT); Cowan, Robin (UNU-MERIT, Maastricht University, and BETA - Universite Louis Pasteur)
    Abstract: We present a discrete choice model of consumption that incorporates two empirically validated aspects of consumer behaviour: inertia in consumption and interaction among consumers. We specify the interaction structure as a regular lattice with consumers interacting only with immediate neighbours. We investigate the equilibrium behaviour of the resulting system and show analytically that for a large range of initial conditions clustering in economic behaviour emerges and persists indefinitely. Short-run behaviour of the model is investigated numerically. This exercise indicates that equilibrium properties of the system can predict a short-run behaviour of the model quite accurately.
    Keywords: Clustering, Interaction, Habits, Consumer choice
    JEL: D11 D83 C65
    Date: 2009

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