nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2009‒12‒11
five papers chosen by
Philip Yu
Hong Kong University

  1. Modelling Unobserved Heterogeneity in Discrete Choice Models of Labour Supply By Pacifico, Daniele
  2. Choice under Pressure: A Dual Preference Model and Its Application By Koker, Tolga
  3. Contraction Consistent Stochastic Choice Correspondence By Dasgupta, Indraneel
  4. Framing effects of risk communication in health-related decision making. Learning from a discrete choice experiment By Florence Nguyen; Marie-Odile Carrère; Nora Moumjid
  5. Preferences, Norms and Constraints in farmers' agro-ecological choices. Case study using choice experiments survey in the Rhone River Delta, France By Mélanie Jaeck; Robert Lifran

  1. By: Pacifico, Daniele
    Abstract: The aim of this paper is to analyse the role of unobserved heterogeneity in structural discrete choice models of labour supply for the evaluation of tax-reforms. Within this framework, unobserved heterogeneity has been estimated either parametrically or nonparametrically through random co- efficient models. Nevertheless, the estimation of such models by means of standard, gradient-based methods is often difficult, in particular if the number of random parameters is high. Given the relative big set of pa- rameters that enter in labour supply models, many researchers have to reduce the role of unobserved heterogeneity by specifying only a small set of random coefficients. However, this simplification affects the estimated labour supply elasticities, which then might hardly change when unob- served heterogeneity is considered in the model. In this paper, we present a new estimation method based on an EM algorithm that allows us to fully consider the effect of unobserved heterogeneity nonparametrically. Results show that labour supply elasticities do change significantly when the full set of coefficients is assumed to be random. Moreover, we analyse the behavioural effects of the introduction of a working-tax credit scheme in the Italian tax-benefit system and show that the magnitude of labour supply reactions and post-reform income distribution do change signifi- cantly when unobserved heterogeneity is fully considered.
    Keywords: Labour supply; discrete choice model; latent class models; EM algorithm; mixed logit; random coefficients; working tax credit
    JEL: H31 C14 H24 J22 C25
    Date: 2009–11–15
  2. By: Koker, Tolga (Yale University)
    Abstract: By making a distinction between public and private preferences, the paper presents a dual preference model depicting possible responses (i.e., exit, sincere voice and self-subversion) to social pressures from two opposing pressure groups. Exit is deserting the setting; sincere voice is publicly expressing dissatisfaction and self-subversion is the misrepresentation of one's private preference under social pressures. Exit and sincere voice involve prohibitive costs, making self-subversion the superior option. Massive self-subversion polarizes the society, harboring multiple social equilibria with oscillating public opinion. In an effort to dominate the public discourse, each rival pressure group opts for favorable corner equilibrium. The paper applies the dual preference model to Turkey where two kinds of self-subversion appear in response to competing Islamist and secularist social projects. Islamist pressures lead to pro-Islamist self-subversion, and secularist pressures to pro-secularist self-subversion, resulting in the polarization of the Turkish public opinion along Islamists vs. Secularists. Three field experiments with 450 respondents provide empirical support for the model's conclusions. The paper ends with the discussion of the model's implications for new social equilibrium(s).
    JEL: D58 D70 D72 D79 D82 Z12
    Date: 2009–03
  3. By: Dasgupta, Indraneel (University of Durham)
    Abstract: We model a general choice environment via probabilistic choice correspondences, with (possibly) incomplete domain and infinite universal set of alternatives. We offer a consistency restriction regarding choice when the feasible set contracts. This condition, 'contraction consistency', subsumes earlier notions such as Chernoff's Condition, Sen's α and β, and regularity. We identify a restriction on the domain of the stochastic choice correspondence, under which contraction consistency is equivalent to the weak axiom of revealed preference in its most general form. When the universal set of alternatives is finite, this restriction is also necessary for such equivalence. Analogous domain restrictions are also identified for the special case where choice is deterministic but possibly multi-valued. Results due to Sen (Rev Econ Stud 38: 307-317, 1971) and Dasgupta and Pattanaik (Econ Theory 31: 35-50, 2007) fall out as corollaries. Thus, conditions are established, under which our notion of consistency, articulated only in reference to contractions of the feasible set, suffices as the axiomatic foundation for a general revealed preference theory of choice behaviour.
    Keywords: stochastic choice correspondence, contraction consistency, regularity, Chernoff’s condition, weak axiom of revealed preference, weak axiom of stochastic revealed preference, complete domain, incomplete domain
    JEL: D11 D71
    Date: 2009–11
  4. By: Florence Nguyen (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines, Centre Léon Bérard - CRLCC Léon Bérard); Marie-Odile Carrère (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines, Centre Léon Bérard - CRLCC Léon Bérard); Nora Moumjid (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines, Centre Léon Bérard - CRLCC Léon Bérard)
    Abstract: Background How to communicate uncertainty is a major concern in medicine and in health economics. We aimed at studying the framing effects of risk communication on stated preferences in a discrete choice experiment (DCE) performed to elicit women's preferences for Hormone Replacement Therapy. Methods Two versions of the questionnaire were randomly administered to respondents. Multiple risks were expressed as natural frequencies using either a constant reference class (Design 1) or variable reference classes (Design 2). We first tested whether Design 1 would impose a lower cognitive burden than Design 2. We then examined whether the two designs resulted in different utility model estimates. Results Design 1 improved consistency (monotonicity and stability). However, rates of dominance or intransitive responses did not differ across designs. Design 1 decreased women's sensitivity to the risk of fractures and increased their sensitivity to the risk of breast cancer as compared to all other attributes. Discussion Framing effects of risk communication on stated preferences may be a major problem in the design of DCEs. More research is needed to determine whether our findings are replicable and to further investigate the normative question of how to improve risk communication in health-related decision-making.
    Keywords: Framing effects; Risk communication; Discrete choice experiment
    Date: 2009
  5. By: Mélanie Jaeck; Robert Lifran
    Abstract: The aim of this paper is to elicit the sensitivity of farmers to payment for agro-environmental services in a context of strong ecological and policy constraints. We present results from a choice experiment survey performed among the whole population of agricultural decision-makers (104) in the Camargue area. Several econometric models have been estimated, the most significant being the Latent Classes one. Three classes have been identified, two of them representing farmers with strong committment to a specified technology (either very chemicals intensive or organic farming ), the main class encompassing farmers complying with the norms of the PGI « Riz de Camargue » . The estimated parameters of the utility function, together with the parameter of the monetary attribute provided the monetary value of each relevant agro-ecological attribute and the associated outcomes (average and risk yield). Outcomes of the choice experiments make a strong case for differentiating incentives for spreading environmental friendly technologies.
    Date: 2009–12

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