nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2010‒12‒11
four papers chosen by
Philip Yu
Hong Kong University

  1. Nonparametric Identification of Dynamic Games with Discrete and Continuous Choices By Jason R. Blevins
  2. Empirical Welfare Analysis in Random Utility Models of Labour Supply By André Decoster; Peter Haan
  3. Consumer welfare and unobserved heterogeneity in discrete choice models: The value of alpine road tunnels By Cerquera, Daniel; Ullrich, Hannes
  4. Do environmental benefits matter? A choice experiment among house owners in Germany By Achtnicht, Martin

  1. By: Jason R. Blevins (Department of Economics, Ohio State University)
    Abstract: This paper shows that the payoff functions in a class of dynamic games of incomplete information are nonparametrically identified under standard assumptions currently used in applied work. Models of this kind are prevalent in empirical industrial organization where, for example, firms in oligopolistic industries make discrete entry and exit decisions followed by continuous investment or pricing decisions. We also provide results for single-agent models, a leading special case which is commonly employed in applied microeconomics more generally.
    Keywords: dynamic games, dynamic discrete choice, nonparametric identification
    JEL: C5 C14 C73
    Date: 2010–11
  2. By: André Decoster; Peter Haan
    Abstract: The aim of this paper is to apply recently proposed individual welfare measures in the context of random utility models of labour supply. Contrary to the standard practice of using reference preferences and wages, these measures preserve preference heterogeneity in the normative step of the analysis. They also make the ethical priors, implicit in any interpersonal comparison, more explicit. On the basis of microdata from the Socio Economic Panel (SOEP) for married couples in Germany, we provide empirical evidence about the sensitivity of the welfare orderings to different normative principles embodied in these measures. We retrieve individual and household specific preference heterogeneity, by estimating a structural discrete choice labor supply model. We use this preference information to construct welfare orderings of households according to the different metrics, each embodying different ethical choices concerning the preference heterogeneity in the consumption-leisure space. We then discuss how sensitive the assessment of a hypothetical tax reform is to the choice of metric. The chosen tax reform is similar to a subsidy of social security contributions.
    Keywords: Welfare measures, labour supply, random utility, preference heterogeneity
    JEL: C35 D63 D78 H24 H31 J22
    Date: 2010
  3. By: Cerquera, Daniel; Ullrich, Hannes
    Abstract: We investigate the sensitivity of consumer surplus estimates to parametric assumptions on individual preference heterogeneity in a discrete choice framework. We compare results from a parametric random coefficients logit model and a recently proposed nonparametric sieve estimator. In particular, we provide an assessment of the direct economic value of crossing the Alps for the European road freight sector. Using revealed preference data from a detailed survey on transalpine road freight traffic, we estimate the yearly cost of closing the Mont-Blanc Tunnel, which was closed for 3 years following a large accident in early 1999. Ultimately, our results permit the economic evaluation of security and transport policy measures affecting transalpine traffic. Our findings suggest that the way we model unobserved heterogeneity significantly affects our welfare results. --
    Keywords: Discrete Choice,Consumer Surplus,Nonparametric Estimation,Transalpine Freight
    JEL: R41 C14 C35 L91 H54
    Date: 2010
  4. By: Achtnicht, Martin
    Abstract: Residential buildings strongly contribute to global CO2 emissions due to the high energy demand for electricity and heating, particularly in industrialised countries. Within the EU, decentralised heat generation is of particular relevance for future climate policy, as its emissions are not covered by the EU ETS. We conducted a choice experiment concerning energy retrofits for existing houses in Germany. In the experiment, the approximately 400 sampled house owners could either choose a modern heating system or an improved thermal insulation for their home. We used standard and mixed logit specifications to analyse the choice data. We found environmental benefits to have a significant impact on choices of heating systems. However, they played no role in terms of insulation choices. Based on the estimated mixed logit model, we further obtained WTP measures for CO2 savings. --
    Keywords: Choice experiment,CO2 emissions,Energy efficiency,Energy saving,Mixed logit,Residential buildings,Willingness to pay
    JEL: C25 D12 Q40 Q51
    Date: 2010

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