nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2011‒10‒09
three papers chosen by
Philip Yu
Hong Kong University

  1. Nested logit or random coefficients logit? A comparison of alternative discrete choice models of product differentiation By Grigolon, Laura; Verboven, Frank
  2. A review of estimators for the fixed-effects ordered logit model By Arne Risa Hole; Andy Dickerson; Luke Munford
  3. Households’ WTP for the Reliability of Gas Supply By Wan-Jung Chou; Andrea Bigano; Alistair Hunt; Stephane La Branche; Anil Markandya; Roberta Pierfederici

  1. By: Grigolon, Laura; Verboven, Frank
    Abstract: We start from an aggregate random coefficients nested logit (RCNL) model to provide a systematic comparison between the tractable logit and nested logit (NL) models with the computationally more complex random coefficients logit (RC) model. We first use simulated data to assess possible parameter biases when the true model is a RCNL model. We then use data on the automobile market to estimate the different models, and as an illustration assess what they imply for competition policy analysis. As expected, the simple logit model is rejected against the NL and RC model, but both of these models are in turn rejected against the more general RCNL model. While the NL and RC models result in quite different substitution patterns, they give robust policy conclusions on the predicted price effects from mergers. In contrast, the conclusions for market definition are not robust across different demand models. In general, our findings suggest that it is important to account for sources of market segmentation that are not captured by continuous characteristics in the RC model.
    Keywords: automobile market; competition policy; discrete choice; nested logit; random coefficients logit
    JEL: L00 L40 L62
    Date: 2011–09
  2. By: Arne Risa Hole (University of Sheffield); Andy Dickerson; Luke Munford
    Abstract: It is well-known that the dummy variable estimator for the fixed-effects ordered logit model is inconsistent when T, the dimension of the panel, is fixed. This talk will review a range of alternative fixed-effects ordered logit estimators that are based on Chamberlain's fixed-effects estimator for the binary logit model. The talk will present Stata code for the estimators and discuss the available evidence on their finite-sample performance. We will conclude by presenting an empirical example in which the estimators are used to model the relationship between commuting and life satisfaction.
    Date: 2011–09–26
  3. By: Wan-Jung Chou (APEC Research Centre for Typhoon and Society); Andrea Bigano (Fondazione Eni Enrico Mattei and Centro Euro-Mediterraneo per i Cambiamenti Climatici); Alistair Hunt (University of Bath); Stephane La Branche (Institute of political studies); Anil Markandya (BC3 Basque Centre for Climate Change, University of Bath); Roberta Pierfederici (Fondazione Eni Enrico Mattei)
    Abstract: The security of natural gas supply is an important issue for all EU countries due to the region’s heavy dependence on imported supply sources and in light of energy demand for gas that is continuously increasing. Discussions have emphasised strategies for securing the supply at the macro level, e.g. diversification in supply sources, increase in storage capacity, etc. By contrast, consumers’ demand for the reliability of gas supply is rarely investigated. Hence this study was conducted to examine the economic implications associated with the security of gas supply directly to domestic consumers. Based on the choice experiment approach, household surveys were conducted in France, Italy and the UK. The results confirmed that the degree of the economic impact of a disruption of gas supply to domestic consumers was a function of the duration of a supply disruption and the season in which a supply cut would take place, as well as other preferences of consumers. The willingness to pay to secure per unit of gas consumption, or alternatively the costs of gas unsupplied, was estimated at between €2.65/cubic metre and €41.48/cubic metre across three different European countries.
    Keywords: Energy Security, Gas Supply, Households, Willingness to Pay, Choice Experiment, EU
    JEL: C35 C93 D12 Q41
    Date: 2011–07

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