nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2011‒02‒05
three papers chosen by
Philip Yu
Hong Kong University

  1. Integrating Routine, Variety Seeking and Compensatory Choice in a Utility Maximizing Framework By Adamowicz, W.L. (Vic); Swait, Joffre
  2. An Enhanced Concave Program Relaxation for Choice Network Revenue Management By Joern Meissner; Arne Strauss; Kalyan Talluri
  3. Dynamic Collective Choice with Endogenous Status Quo By Wioletta Dziuda; Antoine Loeper

  1. By: Adamowicz, W.L. (Vic); Swait, Joffre
    Abstract: Given the large number of choices that consumers make each day it seems likely that they will generally adopt decision strategies that minimize cognitive effort, particularly with low price products such as most items found in a supermarket. One such strategy may be to simply choose what has been chosen in the past, i.e. to fall into a pattern of routine choices or decisions. In contrast, there may be preferences for variety in markets for low price, highly differentiated goods. We develop a conceptual and empirical model of routine choice, and the factors that result in transitions to two strategies other than routine selection, to wit, utility maximizing choice among available alternatives and a variety seeking strategy. The empirical approach we employ provides a mechanism for the examination of panel data that avoids the state dependence issues present in most applications to these types of data. We apply this framework to the choice of two food products that illustrate the heterogeneity across types of products in decision strategies and routine choice patterns.
    Keywords: Choice modeling, routine behavior, varietyâseeking, panel data, Consumer/Household Economics, Demand and Price Analysis, Institutional and Behavioral Economics, D12, D03, C25,
    Date: 2010
  2. By: Joern Meissner (Department of Management Science, Lancaster University Management School); Arne Strauss (Department of Management Science, Lancaster University Management School); Kalyan Talluri (ICREA & Universitat Pompeu Fabra, Ramon Trias Fargas 25-27, 08005 Barcelona, Spain)
    Abstract: The network choice revenue management problem models customers as choosing from an offerset, and the firm decides the best subset to offer at any given moment to maximize expected revenue. The resulting dynamic program for the firm is intractable and approximated by a deterministic linear program called the CDLP which has an exponential number of columns. However, under the choice-set paradigm when the segment consideration sets overlap, the CDLP is difficult to solve. Column generation has been proposed but finding an entering column has been shown to be NP-hard. In this paper, starting with a concave program formulation based on segment-level consideration sets called SDCP, we add a class of valid inequalities called product cuts, that project onto subsets of intersections. In addition we propose a natural direct tightening of the SDCP called kSDCP, and compare the performance of both methods on the benchmark data sets in the literature. Both the product cuts and the kSDCP method are very simple and easy to implement, work with general discrete choice models and are applicable to the case of overlapping segment consideration sets. In our computational testing SDCP with product cuts achieves the CDLP value at a fraction of the CPU time taken by column generation and hence has the potential to be scalable to industrial-size problems.
    Keywords: operations research, marketing, bid prices, yield management, heuristics, discrete-choice, network revenue management
    JEL: C61 M11 M31 L93 L83
    Date: 2011–01
  3. By: Wioletta Dziuda; Antoine Loeper
    Abstract: This paper analyzes an ongoing bargaining situation in which i) preferences evolve overtime, ii) the interests of individuals are not perfectly aligned, and iii) the previous agreement becomes the next status quo and determines the payoffs until a new agreement is reached. We show that the endogeneity of the status quo exacerbates the players’ conflict of interest and decreases the responsiveness of the bargaining outcome to the environment. Players with arbitrarily similar preferences can behave as if their interests were highly discordant. When players become very patient, the endogeneity of the status quo can bring the negotiations to a complete gridlock. Under mild regularity conditions, fixing the status quo throughout the game via an automatic sunset provision improves welfare. The detrimental effect of the endogeneity of the status quo can also be mitigated by concentrating decision rights, for instance, by lowering the supermajority requirement.
    Keywords: Dynamic voting, endogenous status quo, supermajority, partisanship, polarization, policy inertia, sunset provision JEL Classification Numbers: C73, D72, D78
    Date: 2010–10–26

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