nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2012‒01‒25
seven papers chosen by
Philip Yu
Hong Kong University

  1. Do Flemish Households Value Renewables? By Pepermans, Guido
  2. The Impact of Information on the Willingness-to-Pay for Labeled Organic Food Products By Rousseau, Sandra; Vranken, Liesbet
  3. Forecast combination for discrete choice models: predicting FOMC monetary policy decisions By Laurent Pauwels; Andrey Vasnev
  4. EDUCATION AND LABOUR MARKET OUTCOMES: EVIDENCE FROM INDIA By Geraint Johnes; A Aggarwal; R Freguglia; G Spricigo
  5. Willingness to pay for environmental attributes of non-food products: a real choice experiment By Michaud, C.; Llerena, D.; Joly, I.
  6. "Empirical Analysis of the National Treatment Obligation Under the WTO: The Case of Japanese <em>Shochu</em>" By Naoshi Doi; Hiroshi Ohashi
  7. An instrumental variable model of multiple discrete choice By Andrew Chesher; Adam Rosen; Konrad Smolinski

  1. By: Pepermans, Guido (Hogeschool-Universiteit Brussel (HUB), Belgium)
    Abstract: This paper assesses whether and to what extent Flemish households are willing to pay for electricity generated with renewable resources. Via a choice experiment, households were offered the choice between as set of green electricity contracts, characterised by the renewables share in electricity supplied to their dwelling, the renewable generation technology (wind, biomass, PV...) and its impact on the electricity bill. A main effects conditional logit model and a main effects random parameter logit model are estimated. The estimation results show that households prefer ‘green contacts’, but renewables technologies are valued differently. The estimates are then used to assess the marginal willingness to pay by Flemish households for each of the contract attributes. From a policy perspective, the results suggest that a not too small proportion of Flemish households would be willing to switch to another power supply contract if that can be done at limited cost. Moreover, the results suggest that it would not be a good idea to focus on the deployment of one or only a few technologies. Policies resulting in a diversified portfolio of technologies are positively valued by households and will obtain broader support.
    Keywords: choice experiment; renewables; conditional logit model; random parameter logit model; willingness-to-pay
    JEL: C25 C93 D12 Q41
    Date: 2011–05
  2. By: Rousseau, Sandra (Hogeschool-Universiteit Brussel (HUB), Belgium); Vranken, Liesbet
    Abstract: Organic labels potentially play an important role in shaping consumer preferences for organic food products. Information implied by the presence of labels can be used by consumers to facilitate their consumption decisions. Therefore, we investigate the influence of the provision of objective information on the willingness-to-pay of consumers for labeled organic apples in Flanders (Belgium). Initially, we find that Flemish consumers are willing to pay a positive price premium of approximately 33 eurocent per kilogram for labeled organic apples. After the provision of information on the actual environmental and health effects of organic apple production, this price premium becomes even more pronounced and amounts to approximately 56 eurocent per kilogram.
    Keywords: Organic food production; willingness-to-pay; choice experiment; apples
    Date: 2011–05
  3. By: Laurent Pauwels (The University of Sydney Business School); Andrey Vasnev (The University of Sydney Business School)
    Abstract: This paper provides a methodology for combining forecasts based on several discrete choice models. This is achieved primarily by combining one-step-ahead probability forecast associated with each model. The paper applies well-established scoring rules for qualitative response models in the context of forecast combination. Log-scores and quadratic-scores are both used to evaluate the forecasting accuracy of each model and to combine the probability forecasts. In addition to producing point forecasts, the effect of sampling variation is also assessed. This methodology is applied to forecast the US Federal Open Market Committee (FOMC) decisions in changing the federal funds target rate. Several of the economic fundamentals influencing the FOMC decisions are nonstationary over time and are modelled in a similar fashion to Hu and Phillips (2004a, JoE). The empirical results show that combining forecasted probabilities using scores mostly outperforms both equal weight combination and forecasts based on multivariate models.
    Keywords: Forecast combination, Probability forecast, Discrete choice models, Monetary policy decisions
    Date: 2011–06
  4. By: Geraint Johnes; A Aggarwal; R Freguglia; G Spricigo
    Abstract: The impact of education on labour market outcomes is analysed using data from various rounds of the National Sample Survey of India. Occupational destination is examined using both multinomial logit analyses and structural dynamic discrete choice modelling. The latter approach involves the use of a novel approach to constructing a pseudo-panel from repeated cross-section data, and is particularly useful as a means of evaluating policy impacts over time. We find that policy to expand educational provision leads initially to an increased takeup of education, and in the longer term leads to an increased propensity for workers to enter non-manual employment.
    Date: 2011
  5. By: Michaud, C.; Llerena, D.; Joly, I.
    Abstract: This paper investigates consumers’ willingness to pay (WTP) a price premium for two environmental attributes of a non-food agricultural product. We study individual preferences for roses associated with an eco-label and a carbon footprint using an economic experiment combining discrete choice questions and real economic incentives involving real purchases of roses against cash. The data are analyzed with a mixed logit model and reveal significant premiums for both environmental attributes of the product.
    JEL: D12 C91 C25 Q10
    Date: 2012
  6. By: Naoshi Doi (Graduate School of Economics, University of Tokyo); Hiroshi Ohashi (Faculty of Economics, University of Tokyo)
    Abstract: The national treatment obligation, along with the most favored nation obligation, is an important principle of non-discrimination adopted by theWorld Trade Organization. It requires that foreign products be treated no less favorably than national products. This paper empirically examines the 1996 WTO recommendation that a Japanese distilled alcoholic beverage, <em>shochu</em>, be classed as a "directly competitive or substitutable product" with regard to other distilled drinks, and thus that not taxing similarly be in violation of its national treatment obligation. Demand estimates obtained from a random-coefficient discrete-choice model reveal that a substitution pattern of <em>shochu</em> is far more complicated than that presumed by the WTO. Upon the WTO recommendation, Japan made all distilled alcoholic beverages be taxable at the same level in 2000. Our simulation analysis indicates that the revised tax rates improved but did not maximize Japanese national welfare.
    Date: 2012–01
  7. By: Andrew Chesher (Institute for Fiscal Studies and University College London); Adam Rosen (Institute for Fiscal Studies and University College London); Konrad Smolinski (Institute for Fiscal Studies)
    Abstract: <p><p>This paper studies identification of latent utility functions in multiple discrete choice models in which there may be endogenous explanatory variables, that is explanatory variables that are not restricted to be distributed independently of the unobserved determinants of latent utilities. The model does not employ large support, special regressor or control function restrictions, indeed it is silent about the process delivering values of endogenous explanatory variables and in this respect it is incomplete. Instead the model employs instrumental variable restrictions requiring the existence of instrumental variables which are excluded from latent utilities and distributed independently of the unobserved components of utilities.</p> </p><p><p>We show that the model delivers set identification of the latent utility functions and we characterize sharp bounds on those functions. We develop easy-to-compute outer regions which in parametric models require little more calculation than what is involved in a conventional maximum likelihood analysis. The results are illustrated using a model which is essentially the parametric conditional logit model of McFadden (1974) but with potentially endogenous explanatory variables and instrumental variable restrictions. The method employed has wide applicability and for the first time brings instrumental variable methods to bear on structural models in which there are multiple unobservables in a structural equation.</p></p>
    Date: 2011–12

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