nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2010‒12‒04
four papers chosen by
Philip Yu
Hong Kong University

  1. Maintaining symmetry of simulated likelihood functions By Laura Mørch Andersen
  2. Willingness to Pay to Reduce School Bullying By Persson, Mattias; Svensson, Mikael
  3. On the rationalizability of observed consumers’ choices when preferences depend on budget sets and (potentially) on anything else By Ennio Bilancini
  4. Selecting random parameters in discrete choice experiment for environmental valuation: A simulation experiment. By Petr Mariel; Amaya De Ayala; David Hoyos; Sabah Abdullah

  1. By: Laura Mørch Andersen (Institute of Food and Resource Economics, University of Copenhagen)
    Abstract: This paper suggests solutions to two different types of simulation errors related to Quasi-Monte Carlo integration. Likelihood functions which depend on standard deviations of mixed parameters are symmetric in nature. This paper shows that antithetic draws preserve this symmetry and thereby improves precision substantially. Another source of error is that models testing away mixing dimensions must replicate the relevant dimensions of the quasi-random draws in the simulation of the restricted likelihood. These simulation errors are ignored in the standard estimation procedures used today and this paper shows that the result may be substantial estimation- and inference errors within the span of draws typically applied.
    Keywords: Quasi-Monte Carlo integration; Antithetic draws; Likelihood Ratio tests; simulated likelihood; panel mixed multinomial logit; Halton draws
    JEL: C15 C25
    Date: 2010–11
  2. By: Persson, Mattias (Department of Business, Economics, Statistics and Informatics); Svensson, Mikael (Department of Business, Economics, Statistics and Informatics)
    Abstract: Being a victim of school bullying is related to several severe direct and indirect negative social and health consequences. There are an increasing number of antibullying programs used in schools in order to prevent and reduce school bullying, but often with a lack of understanding both regarding the effectiveness and monetary benefits of these programs. This paper uses a discrete choice experiment conducted in Sweden in the spring of 2010 to elicit respondents’ willingness to pay to reduce school bullying. Using both non-parametric and parametric approaches the results indicate a (societal) willingness to pay for each reduced statistical victim of bullying of 33 298 to 39,585 Swedish kronor (approx. €3 640 to €4 330). WTP was higher among individuals who reported to have themselves been bullied while in school. The results is a necessary input in order to conduct economic evaluations of antibullying programs and provides policymakers with useful information on taxpayers’ preferred allocations to antibullying programs.
    Keywords: Willingness to Pay; Choice Experiment; Bullying; School; Adolescents
    JEL: D61 I12 I21
    Date: 2010–11–22
  3. By: Ennio Bilancini
    Abstract: We prove that defining consumers’ preferences over budget sets is both necessary and sufficient to make every fully informative and finite set of observed consumption choices rationalizable by a collection of preferences which are transitive, complete, and monotone with respect to own consumption. Our finding has two important theoretical consequences. First, assuming that preferences depend on budget sets is illegitimate under the scientific commitments of revealed preference theory. Second, as long as consumers’ preferences are not defined over budget sets, we can assume that preferences depend on observable objects other than own consumption without compromising the logical possibility to reject the model against observation. We however point out that, despite this logical possibility, in practice it can be almost impossible to reject a model where preferences are defined over objects that depend on budget sets. As an example of this we show that if preferences are defined over consumption choices of other individuals then rationalization fails only in cases of negligible practical interest.
    Keywords: Revealed Preferences, Budget Sets, Rational Preferences, Rationalizability
    JEL: B40 D11
    Date: 2010–11
  4. By: Petr Mariel (Department of Applied Economics III (Econometrics and Statistics), University of the Basque Country); Amaya De Ayala (Department of Applied Economics III (Econometrics and Statistics), University of the Basque Country); David Hoyos (Department of Applied Economics III (Econometrics and Statistics), University of the Basque Country); Sabah Abdullah (Environmental Economics Unit, Institute for Public Economics, University of the Basque Country)
    Abstract: This paper examines the various tests commonly used to select random parameters in choice modelling. The most common procedures for selecting random parameters are: the Lagrange Multiplier test as proposed by McFadden and Train (2000), the t-statistic of the deviation of the random parameter and the log-likelihood ratio test. The identification of random parameters in other words the recognition of preference heterogeneity among population is based on the fact that an individual makes a choice depending on her/his: tastes, perceptions and experiences. A simulation experiment was carried out based on a real choice experiment and the results indicated that the power of these three tests depends importantly on the spread and type of the tested parameter distribution.
    Keywords: choice experiment, preference heterogeneity, random parameter logit, simulation, tests for selecting random parameters
    JEL: Q51
    Date: 2010–11–23

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