nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2010‒06‒18
eight papers chosen by
Philip Yu
Hong Kong University

  1. Heterogeneity in dynamic discrete choice models.. By Browning, Martin; Carro, Jesus
  2. A comparison of responses to single and repeated discrete choice questions By McNair, Ben J.; Bennett, Jeff; Hensher, David A.
  3. Estimating ordered categorical variables using panel data: a generalized ordered probit model with an autofit procedure By Pfarr, Christian; Schmid, Andreas; Schneider, Udo
  4. Using a Discrete Choice Experiment to Elicit the Demand for a Nutritious Food: Willingness-to-Pay for Orange Maize in Rural Zambia By J. V. Meenakshi; Abhijit Banerji; Victor Manyong; Keith Tomlins; Priscilla Hamukwala; Nitya Mittal
  5. Willingness to Pay for the Preservation of Lo Go - Xa Mat National Park in Vietnam By Dang Le Hoa; Nguyen Thi Y Ly
  6. Households’ Willingness to Pay for Undergrounding Electricity and Telecommunications Wires By McNair, Ben J.; Bennett, Jeff; Hensher, David A.
  7. Valuing Environmental Services Using Contingent Valuation Method By Duangmany Luangmany; Souphandone Voravong; Kaisorn Thanthathep; Daovinh Souphonphacdy; Malabou Baylatry
  8. Solid Waste Disposal: A Choice Experiment Experience in Malaysia By Pek , Chuen Khee; Othman, Jamal

  1. By: Browning, Martin; Carro, Jesus
    Abstract: We consider dynamic discrete choice models with heterogeneity in both the levels parameter and the state dependence parameter. We first present an empirical analysis that motivates the theoretical analysis which follows. The theoretical analysis considers a simple two-state, first-order Markov chain model without covariates in which both transition probabilities are heterogeneous. Using such a model we are able to derive exact small sample results for bias and mean squared error (MSE). We discuss the maximum likelihood approach and derive two novel estimators. The first is a bias corrected version of the Maximum Likelihood Estimator (MLE) although the second, which we term MIMSE, minimizes the integrated mean square error. The MIMSE estimator is always well defined, has a closed-form expression and inherits the desirable large sample properties of the MLE. Our main finding is that in almost all short panel contexts the MIMSE significantly outperforms the other two estimators in terms of MSE. A final section extends the MIMSE estimator to allow for exogenous covariates. 1368-4221 U Oxford; U Carlos III de Madrid. 1095502 .
    JEL: C23
    Date: 2010
  2. By: McNair, Ben J.; Bennett, Jeff; Hensher, David A.
    Abstract: According to neoclassical economic theory, a stated preference elicitation format comprising a single binary choice between the status quo and one alternative is incentive compatible under certain conditions. Formats typically used in choice experiments comprising a sequence of discrete choice questions do not hold this property. In this paper, the effect on stated preferences of expanding the number of binary choice tasks per respondent from one to four is tested using a split sample treatment in an attribute-based survey relating to the undergrounding of overhead electricity and telecommunications wires. We find evidence to suggest that presenting multiple choice tasks per respondent decreases estimates of expected willingness to pay. Preferences stated in the first of a sequence of choice tasks are not significantly different from those stated in the incentive compatible single binary choice task, but, in subsequent choice tasks, responses are influenced by cost levels observed in past questions. Three behavioural explanations can be advanced – weak strategic misrepresentation, reference point revision and cost-driven value learning. The evidence is contrary to the standard assumption of truthful response with stable preferences.
    Keywords: Choice experiment; willingness-to-pay; incentive compatibility; order effects; undergrounding
    JEL: L94 Q51
    Date: 2010–05
  3. By: Pfarr, Christian; Schmid, Andreas; Schneider, Udo
    Abstract: Estimation procedures for ordered categories usually assume that the estimated coefficients of independent variables do not vary between the categories (parallel-lines assumption). This view neglects possible heterogeneous effects of some explaining factors. This paper describes the use of an autofit option for identifying variables that meet the parallel-lines assumption when estimating a random effects generalized ordered probit model. We combine the test procedure developed by Richard Williams (gologit2) with the random effects estimation command regoprob by Stefan Boes.
    Keywords: generalized ordered probit; panel data; autofit; self-assessed health
    JEL: C87 C23 C25 I10
    Date: 2010–06–10
  4. By: J. V. Meenakshi (Department of Economics, Delhi School of Economics, Delhi, India); Abhijit Banerji (Department of Economics, Delhi School of Economics, Delhi, India); Victor Manyong (International Institute of Tropical Agriculture); Keith Tomlins (Natural Resources Institute, University of Greenwich); Priscilla Hamukwala (University of Zambia); Nitya Mittal (Department of Economics, Delhi School of Economics, Delhi, India)
    Abstract: Using a discrete choice experiment, this paper estimates the willingness to pay for biofortified orange maize in rural Zambia. The study design has five treatment arms, which enable an analysis of the impact of nutrition information, comparing the use of simulated radio versus community leaders in transmitting the nutrition message, on willingness to pay, and to account for possible novelty effects in the magnitude of premiums or discounts. The estimation strategy also takes into account lexicographic preferences of a subset of our respondents. The results suggest that (a) orange maize is well liked and can compete with white maize in the absence of a nutrition campaign, (b) there is a premium for orange maize with nutrition information, and (c) the mode of nutritional-message dissemination does not have a large impact on consumer acceptance, and (d) novelty effects do not translate into higher willingness to pay for orange maize.
    Date: 2010–06
  5. By: Dang Le Hoa; Nguyen Thi Y Ly
    Abstract: Lo Go - Xa Mat National Park has great value in terms of biodiversity but preserving the park is a great challenge for the Vietnamese government. This study estimated the willingness to pay of households to preserve Lo Go - Xa Mat National Park, using the contingent valuation method. We employed the single-bounded dichotomous choice question format to estimate how much households in Ho Chi Minh City were willing to contribute towards a preservation plan for the park. This plan comprised twelve preservation activities and compensating the local communities for their foregone income. The study found that households in Ho Chi Minh City were willing to pay at least VND 6,209 per month for three years for the preservation of Lo Go - Xa Mat National Park. With protest votes included, factors strongly affecting households' willingness to pay were bid amount and the amount of their monthly electricity bill. The education level of the respondents and the number of working people in the household had significant but lesser impact on their willingness to pay. Without protest votes, the bid amount, monthly electricity bill amount and education level of respondents significantly affected willingness to pay. We found that the annualized benefit value of the project was larger than its annualized cost. This indicated that the preservation plan was economically viable. This study does not provide the total value of Lo Go - Xa Mat National Park, but it shows the great value of the park in terms of local households' willingness to pay for its preservation and this is important information for policy-makers in deciding how to protect the park efficiently.
    Keywords: willingness to pay, Vietnam
    Date: 2009–11
  6. By: McNair, Ben J.; Bennett, Jeff; Hensher, David A.
    Abstract: Underground telecommunications and low-voltage electricity networks have several advantages over overhead networks including reliability of supply, safety and improved visual amenity. The economic viability of replacing existing overhead networks with new underground networks depends on the value of these benefits to households, but no complete value estimates are available in the literature. This paper represents a contribution towards addressing this research gap. A stated choice survey is used to estimate willingness-to-pay for undergrounding in established residential areas in Canberra. Average willingness-to-pay is at least $6,838 per household and there is significant variation in preferences over the population. The results suggest that benefits would be highest in areas with higher household income and older residents where visual amenity, safety, tree trimming or restrictions on the use of yard space are of concern.
    Keywords: Stated preference; willingness-to-pay; undergrounding; supply reliability
    JEL: L94 Q51
    Date: 2010–05
  7. By: Duangmany Luangmany (Environmental Training Center and the Environment Research Institute); Souphandone Voravong (Environmental Training Center and the Environment Research Institute); Kaisorn Thanthathep (Environmental Training Center and the Environment Research Institute); Daovinh Souphonphacdy (Environmental Training Center and the Environment Research Institute); Malabou Baylatry (Environmental Training Center and the Environment Research Institute)
    Abstract: This paper presents the results of two studies in Lao PDR that assessed people's willingness to pay (WTP) using the Contingent Valuation Methodology (CVM). The first study investigated the WTP of residents for the sustainable development and maintenance of urban parks in the city using Saysetha Park as the case study. In this study residents expressed that urban parks are very important to them as they are areas for relaxation and areas to conserve urban biodiversity. The WTP survey revealed that the residents' mean WTP is 10,741kip/month/household. With this amount, it was estimated that a monthly water bill surcharge of 3,000/kip/month/household may be recommended to maintain urban parks. The second study assessed the WTP for biodiversity conservation and sustainability in the Houay Nhang Protected Area. Using CVM, the WTP responses showed that the monthly contribution that would be acceptable to the people is 5,000 kip. The logit regression shows that this WTP value is influenced by bid prices, gender, and educational levels. The respondents recognized the importance of the protected area for environmental and biodiversity protection.
    Keywords: contingent valuation, Lao PDR
    Date: 2009–10
  8. By: Pek , Chuen Khee; Othman, Jamal
    Abstract: Increasing generation of solid waste requires better quality disposal options in Malaysia. Control tipping is the most commonly used complemented by sanitary landfill and incineration. This study estimates the non-market values of improved waste disposal services and also ranking them using choice experiment. River water quality is the most concerned followed by psychological fear, air pollution and land use. Socio-economic background and distance factor influence the types of compensating surpluses. These conclude the importance of perception, influenced by socio-economic background, the presence of the Not-In-My-Backyard syndrome and that sanitary landfill is more preferred.
    Keywords: Solid waste disposal; willingness-to-pay; choice experiment
    JEL: Q51
    Date: 2009–10–01

This nep-dcm issue is ©2010 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.