nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2011‒05‒24
seventeen papers chosen by
Philip Yu
Hong Kong University

  1. Discrete choice modelling of labour supply in Luxembourg through EUROMOD microsimulation By Berger, Frederic; Islam, Nizamul; Liégeois, Philippe
  2. Dealing with negative marginal utilities in the discrete choice modelling of labour supply By Liégeois, Philippe; Islam, Nizamul
  3. A Two-Stage Choice Experiment Approach to Elicit Consumer Preferences By Gao, Zhifeng; Yu, Xiaohua
  4. Should Japanese Tax System Be More Progressive? By Shun-ichiro Bessho; Masayoshi Hayashi
  5. Structural stochastic volatility in asset pricing dynamics: Estimation and model contest By Franke, Reiner; Westerhoff, Frank
  6. Characterizing Spatial Pattern in Ecosystem Service Values when Distance Decay Doesnât Apply: Choice Experiments and Local Indicators of Spatial Association By Johnston, Robert J.; Ramachandran, Mahesh; Schultz, Eric T.; Segerson, Kathleen; Besedin, Elena Y.
  8. The Impact of Country of Origin Label on Consumers' Willingness-to-Pay for Organic Food By Xie, Jing; Gao, Zhifeng; Zhao, Xin; Swisher, Marilyn E.
  9. Consumer WTP for Blueberry Attributes: A Hierarchical Bayesian Approach in the WTP Space By Shi, Lijia; House, Lisa A.; Gao, Zhifeng
  10. Rider Preferences and Values of Equestrian Trail Characteristics in Kentucky By Pelton, Marie; Hu, Wuyang; Pagoulatos, Angelos
  11. Using a Modified Payment Card Survey on Chinese Consumersâ Willingness to Pay for Fair Trade Coffee: Would the Starting Point Matter By Yang, Shang-Ho; Hu, Wuyang
  12. A Comparison of Auction and Choice Experiment: An Application to Consumer Willingness to Pay for Rice with Improved Storage Management By Su, Lianfan; Adam, Brian; Lusk, Jayson; Arthur, Frank
  13. Measuring Willingness to Accept for GM Food by Characteristics By Tae-Kyun, Kim; Hyun-Ji, Lee; Na-Kyoung, Hong
  14. Willingness of Agricultural Landowners to Supply Perennial Energy Crops By Smith, David J.; Schulman, Candi; Current, Dean; Easter, K. William
  15. A Non-Hypothetical and Incentive Compatible Method for Estimating Consumer Willingness-to-Pay for a Novel Functional Food:The Case of Pomegranates By McAdams, Callie P.; Palma, Marco A.; Ishdorj, Ariun; Hall, Charles R.
  16. Factors Influencing Cotton Farmersâ Perceptions about the Importance of Information Sources in Precision Farming Decisions By Velandia, Margarita M.; Lambert, Dayton M.; Mendieta, Maria P.; Roberts, Roland K.; Larson, James A.; English, Burton C.; Rejesus, Roderick M.; Mishra, Ashok K.
  17. Subjective well-being, income and relative concerns in the UK By Distante, Roberta

  1. By: Berger, Frederic; Islam, Nizamul; Liégeois, Philippe
    Abstract: In this study, the household labour supply is modelled as a discrete choice problem assuming that preference for leisure and consumption can be described by a quadratic utility function which allows for non-convexities in the budget set. We assess behavioural responses to the significant changes in the tax-benefit system during 2001-2002 in Luxembourg. Only moderate impact is found, on average, on the efficiency of the economy as measured by the labour supply effects. The impact is indeed concentrated on richer single women. These increase significantly their labour force, which more than doubles the non-behavioural effect of the tax reform on disposable income and boosts the gains in well-being for that part of population.
    Date: 2010–08–01
  2. By: Liégeois, Philippe; Islam, Nizamul
    Abstract: In discrete choice labour supply analysis, it is often reasonably expected that utility is increasing with income. Yet, analyses based on discrete choice models sometimes mention that, when no restriction is imposed a priori in the statistical optimization program, the monotonicity condition is not fully satisfied ex post. Obviously, the standard statistical optimization program might be completed with conditions (one per individual) imposing positive marginal utilities. Unfortunately, such a high-dimensional program most often appears to be rather time-consuming in order to be solved, if not practically unsolvable. In order to overcome this drawback, some authors impose general parametric restrictions a priori (hence reducing de facto the dimension of the parameter set), which is sufficient to lead to positive marginal utilities ex post. However, those restrictions might sometimes appear to be unnecessarily too severe and then generate a sub-optimal set of estimated values for the parameters of the utility function. Alternatively, we show that it may be easy to avoid unnecessary restrictions. The high-dimensional program including conditions for positive marginal utilities for all can sometimes be equivalently replaced by a one-dimensional one. At the end, no observation is hopefully showing negative marginal utility anymore at optimum.
    Date: 2010–10–01
  3. By: Gao, Zhifeng; Yu, Xiaohua
    Abstract: Another version will replace the current draft
    Keywords: choice experiment, milk, attribute information, Agribusiness, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Marketing,
    Date: 2011
  4. By: Shun-ichiro Bessho; Masayoshi Hayashi
    Abstract: We investigate the effects of marginal changes of marginal tax rates of Japanese income tax system, computing the social marginal costs of public funds (SMCF) generated by marginal increase in tax rates. We use large micro data sets on Japanese households, and estimate a structural discrete choice model of household labor supply. Our estimation results show that the average of total elasticity of males ranges between 0.0276 and 0.0521, and that of female between 0.0429 and 0.2134. Based on the estimated utility functions, we find that SMCF for raising the marginal tax rate applied for those with low- or medium-income level is smaller than those with more income. Our results could suggest Japanese income tax system should be less progressive.
    Keywords: Social marginal cost of public funds, structural discrete choice model, household labor supply
    JEL: H21 H24 H31 J22
    Date: 2011–03
  5. By: Franke, Reiner; Westerhoff, Frank
    Abstract: In the framework of small-scale agent-based financial market models, the paper starts out from the concept of structural stochastic volatility, which derives from different noise levels in the demand of fundamentalists and chartists and the time-varying market shares of the two groups. It advances several different specifications of the endogenous switching between the trading strategies and then estimates these models by the method of simulated moments (MSM), where the choice of the moments reflects the basic stylized facts of the daily returns of a stock market index. In addition to the standard version of MSM with a quadratic loss function, we also take into account how often a great number of Monte Carlo simulation runs happen to yield moments that are all contained within their empirical confidence intervals. The model contest along these lines reveals a strong role for a (tamed) herding component. The quantitative performance of the winner model is so good that it may provide a standard for future research. --
    Keywords: Method of simulated moments,moment coverage ratio,herding,discrete choice approach,transition probability approach
    JEL: D84 G12 G14 G15
    Date: 2011
  6. By: Johnston, Robert J.; Ramachandran, Mahesh; Schultz, Eric T.; Segerson, Kathleen; Besedin, Elena Y.
    Abstract: Stated preference analyses commonly impose strong and unrealistic assumptions in response to spatial welfare heterogeneity. These include spatial homogeneity or continuous distance decay. Despite their ubiquity in the valuation literature, global assumptions such as these have been increasingly abandoned by non-economics disciplines in favor of approaches that allow for spatial patchiness. This paper develops parallel methods to evaluate local patchiness and hot spots in stated preference welfare estimates, characterizing relevant patterns overlooked by traditional approaches. The analysis draws from a choice experiment addressing river restoration. Results demonstrate shortcomings in standard treatments of spatial heterogeneity and insights available through alternative methods.
    Keywords: Willingness to Pay, Hot Spot, Stated Preference, Ecosystem Service, Valuation, Environmental Economics and Policy, Research Methods/ Statistical Methods,
    Date: 2011
  7. By: Londono, Catalina; Ando, Amy W.
    Abstract: Stormwater runoff causes environmental problems such as flooding, soil erosion and water pollution. Conventional stormwater management has focused primarily on flood reduction, while a new generation of decentralized stormwater solutions yields ancillary benefits in the form of improved surface water quality and increased groundwater recharge. Previous research has estimated values for flood reduction from stormwater management, but no estimates exist for the willingness to pay for some of the other benefits of alternative approaches to stormwater control. This paper uses a choice-experiment survey of households in Champaign-Urbana, Illinois to estimate the values of multiple attributes of stormwater management outcomes, and to identify householdsâ willingness to pay for different attributes of stormwater management controls. Results show that people are willing to pay not only for reduction of flooding frequency, especially basement flooding, but also for improved environmental quality. Furthermore, an individualâs values depend on the status quo condition that they experience.
    Keywords: Nonmarket valuation, state-dependent preferences, stormwater, aquatic habitat, choice experiment, Environmental Economics and Policy,
    Date: 2011
  8. By: Xie, Jing; Gao, Zhifeng; Zhao, Xin; Swisher, Marilyn E.
    Keywords: organic food, country of origin, choice experiment, Agribusiness, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Marketing,
    Date: 2011
  9. By: Shi, Lijia; House, Lisa A.; Gao, Zhifeng
    Abstract: A stated preference experiment is conducted to elicit consumer WTPs for various blueberry attributes. The mixed logit model is employed to account for consumer heterogeneity. The model is set up in the WTP space where the distributions of WTPs are directly specified. Considering the high diversity of consumer perception and the remarkable benefits from differential marketing, we apply the hierarchical Bayesian approach and the discussion is based on the individual level WTP estimates. The results show that âlocal producedâ attribute is preferred over simply âproduced in the U.S.â by most respondents. By contrast, less than 50% of the respondents are willing to pay premium for organic blueberries. In addition, hardly any relationship between demographics and WTPs is detected. Demographic information seems to have little explanation power for consumer perception in small purchases like fruits or vegetables. In this light, the hierarchical Bayesian approach is critical to the practice of differential marketing strategies.
    Keywords: Willingness to Pay, Blueberry Attributes, Mixed Logit, Preference Space, WTP Space, Hierarchical Bayesian, Differential Marketing, Agribusiness, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Marketing,
    Date: 2011
  10. By: Pelton, Marie; Hu, Wuyang; Pagoulatos, Angelos
    Abstract: A conjoint analysis of equestrian trail characteristics (trail length, scenic views, open land, bathroom/shower facilities, restricted use, distance, and entrance fee) is conducted for the state of Kentucky. The conditional logit results show location is an important determiner of willingness to pay. In particular, scenic views and restricted use are highly valued (WTP above $20). However, increased distance from home to the trail results in a negative willingness to pay.
    Keywords: Equestrian trail characteristics, Conditional logit, Conjoint analysis, Environmental Economics and Policy,
    Date: 2011
  11. By: Yang, Shang-Ho; Hu, Wuyang
    Abstract: Coffee consumption in China is increasing rapidly over the recent years. This study offers one of the few initial attempts to not only understand general consumption behavior associated with Chinese coffee, but to explore the viability of niche markets for coffee with the credence attribute âfair tradeâ. A modified payment card approach was adopted as the consumer willingness to pay elicitation method. Survey results of 564 consumers from the city of Wuhan, China suggest a positive attitude toward coffee as an alternative drink and a willingness to pay a premium for âfair tradeâ coffee. This study also explores and describes the potential impact of starting point bias, which has been relatively well documented in the dichotomous choice literature but has not been thoroughly addressed in a payment card context.
    Keywords: </dc:subject><dc:subject>coffee, fair trade, payment card, starting point bias, willingness to pay, Agribusiness, Consumer/Household Economics, Food Security and Poverty, International Development, Marketing, Research Methods/ Statistical Methods, D12, Q13,
    Date: 2011–05–03
  12. By: Su, Lianfan; Adam, Brian; Lusk, Jayson; Arthur, Frank
    Abstract: Experimental auction and discrete choice experiment are two popular value elicitation methods. Theoretically they should yield the same results but empirical results have been mixed (e.g., Lusk and Schroeder 2004, 2006; Corrigan et al. 2010.) This study uses both methods to determine consumersâ willingness to pay (WTP) for rice with improved insect control and for rice stored using Integrated Pest Management (IPM). This study investigates two potential reasons â anchoring and information â for why some studies have found apparent inconsistencies between auction and choice experiment results. Results indicate that consumersâ WTP derived in the auction and choice experiments are significantly different. Consumersâ average bids in the auction are higher than their willingness to pay calculated from the choice experiments. Further, anchoring in the choice experiment appears to be an explanation for the discrepancy. Providing consumers with more product information help consumers behave more consistent in terms of having same preference ranking for different rice samples in the auction and the choice experiments, but their average does not substantially affect the discrepancy.
    Keywords: 2nd price auction, choice experiment, price level, information, Consumer/Household Economics, Crop Production/Industries,
    Date: 2011
  13. By: Tae-Kyun, Kim; Hyun-Ji, Lee; Na-Kyoung, Hong
    Abstract: Korean consumers' willingness to accept (WTA) for GM food are studied in this paper. This study compares hypothetical and nonhypothetical responses to choice experiment questions. We test for hypothetical bias in a choice experiment involving GM rice with differing characteristic attributes and multinomial logit model is applied to predict the estimated results. In general, hypothetical responses predicted higher probabilities of purchasing GM rice than nonhypothetical responses. Thus, hypothetical choices overestimate willingness to accept for GM rice. The results of this paper could contributes to government's GM food policies and subsequent studies, also improving economic welfare of farmers and consumers.
    Keywords: GM Food, Willingness to Accept, Choice experiment, Hypothetical bias, Food Consumption/Nutrition/Food Safety,
    Date: 2011
  14. By: Smith, David J.; Schulman, Candi; Current, Dean; Easter, K. William
    Abstract: A survey of Minnesota agricultural landowners was conducted to elicit farmersâ willingness to supply perennial bioenergy crops. The survey area in the northern Corn Belt region is primarily planted with corn and soybean. Using dichotomous choice questions, the respondents were asked about their willingness to grow perennial grasses and short rotation woody crops (SRWC) given a range of expected net incomes relative to current net incomes. The survey included questions about farmersâ attitudes about the environment and renewable energy, perceived barriers to growing perennial crops, land tenure, and demographic information. The results from this survey add to the broader understanding of farm householdsâ willingness to participate in the bioenergy market by growing perennial crops. At nonnegative relative net incomes, on average forty-eight percent of farmers were wiling to grow SRWC on at least some of their land with no significant difference between percentages at each relative net income. Seventy-two percent of farmers were willing to grow perennial grasses at non-negative relative net incomes. Farmers were more willing to supply grasses than SRWC at a given relative net income. This may be due to the longer commitment period, longer lapse in income, higher unavailability of harvesting equipment and costs of reconversion of SRWC compared to perennial grasses. Some farmers (18%) are willing to grow perennial grasses at net incomes that are lower then their current net incomes. In contrast the percentage of respondents willing to grow SRWC at lower relative net incomes was not statistically different from zero. Perennial acreage and share of total acreage were non-decreasing in relative net incomes. This study illustrates the importance in understanding farm householdsâ willingness to supply when estimating aggregate supply in emerging bioenergy markets. Net incomes from growing perennial bioenergy crops must be at least as high as their current net income for more then a small share of farmers to be willing to supply in the bioenergy market. Farmers must also have higher returns than those from perennial grasses to be as likely to grow SRWC. Increasing relative net incomes from perennial crops does increase the quantity of perennial crops supplied with most of the increase coming from farmers who already participate in the market by increasing their perennial acreage.
    Keywords: Perennial Bioenergy, Minnesota, Farmer survey, Crop Adoption, Crop Production/Industries, Resource /Energy Economics and Policy,
    Date: 2011
  15. By: McAdams, Callie P.; Palma, Marco A.; Ishdorj, Ariun; Hall, Charles R.
    Abstract: A preference and valuation mechanism that compared results of an experimental auction and nonhypothetical preference rankings was developed and used to elicit preferences for pomegranate products from a representative sample of shoppers in Texas. Familiarity with pomegranate products increased willingness-to-pay (WTP) for pomegranates, as did tasting and providing additional information on the health benefits of the products. Ready-to-eat and juice products were preferred to whole fruit products. Subjects did not indicate an increased WTP for Texas varieties over California Wonderful pomegranate based on auction bids but indicated a preference for one Texas variety in the nonhypothetical ranking procedure; thus, the auction results and nonhypothetical preference ranking procedures were divergent. Further, there were interaction effects of the information treatments with the product characteristics.
    Keywords: willingness-to-pay, pomegranate, experimental auction, ranking, health, novel product, Food Consumption/Nutrition/Food Safety, Marketing, D12, Q13,
    Date: 2011
  16. By: Velandia, Margarita M.; Lambert, Dayton M.; Mendieta, Maria P.; Roberts, Roland K.; Larson, James A.; English, Burton C.; Rejesus, Roderick M.; Mishra, Ashok K.
    Abstract: Information generated by precision farming technologies is of particular importance to producers. Precision farming technologies implies the ability to improve the management of production factors using site-specific information. This study examines factors influencing cotton farmersâ perceptions about the importance of crop consultants, farm input dealerships, Extension, other farmers, trade shows, the Internet and printed news/media for making precision farming decisions using a rank ordered logit model (ROLM). Results suggest that age, land tenure, income, percentage of income from farming, and location may affect farmersâ perceptions about the importance of different information sources when making decisions about precision farming technologies. Results suggest that regardless of farmer/farm business characteristics other farmers (OF) is one of the most important information sources when making precision farming decisions. Findings suggest that high income producers are more likely to prefer crop consultants, University/Extension, trade shows, and the Internet over OF as a source of information when making decisions about precision farming technologies. Findings also suggest that researchers need to be very careful when designing questions that ask respondents to rank alternatives so that they guarantee that individuals with different skills are able to precisely understand what is being asked. Decreasing the number of alternatives respondents must consider may be one strategy to reduce the complexity of ranking questions to minimize the probability of the respondents leaving alternatives unranked or ranking them randomly.
    Keywords: Information-source preferences, Rank Ordered Logit Model, Precision Farming, Production Economics, Research Methods/ Statistical Methods, Q16, C25,
    Date: 2011
  17. By: Distante, Roberta
    Abstract: We present an empirical model aimed at testing the relative income hypothesis and the effect of deprivation relative to mean income on subjective well-being. The main concern is to deal with subjective panel data in an ordered response model where error homoskedasticity is not assumed. A heteroskedastic pooled panel ordered probit model with unobserved individual-specific effects is applied to micro-data available in the British Household Panel Survey for 1996-2007. In this framework, absolute income impacts negatively on both completely satisfied and dissatisfied individuals, while relative income affects positively the most satisfied ones. Such an effect is asymmetric, impacting more severely on the relatively poor in the reference group. We argue that our results buttress the validity of the relative income hypothesis as an explanation of the happiness paradox.
    Keywords: Subjective Well-being; Relative Income; Absolute Income; Deprivation; Panel Data; Discrete Choice Models.
    JEL: D6 I31 C35 C33
    Date: 2010–11–12

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