nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2012‒04‒03
five papers chosen by
Philip Yu
Hong Kong University

  1. Nested logit or random coefficients logit? A comparison of alternative discete models of product differentiation By Laura GRIGOLON; Frank VERBOVEN
  2. Dynamic Wage and Employment Effects of Elder Parent Care By Meghan Skira
  3. We want to sort! - assessing households' preferences for sorting waste By Czajkowski, Mikołaj; Hanley, Nick; Kądziela, Tadeusz
  4. Short Run Needs and Long Term Goals: A Dynamic Model of Thirst Management By Guofang Huang; Ahmed Khwaja; K. Sudhir
  5. The effect of non-pecuniary job attributes on labour supply By Holguer Xavier JARA TAMAYO

  1. By: Laura GRIGOLON; Frank VERBOVEN
    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.
    Date: 2011–09
  2. By: Meghan Skira (Boston College)
    Abstract: This paper formulates and estimates a dynamic discrete choice model of elder parent care and work to analyze how caregiving affects a woman’s current and future labor force participation and wages. Intertemporal tradeoffs, such as decreased future earning capacity due to a current reduction in labor market work, are central to the decision to provide care. The existing literature, however, overlooks such long-term considerations. I depart from the previous literature by modeling caregiving and work decisions in an explicitly intertemporal framework. The model incorporates dynamic elements such as the health of the elderly parent, human capital accumulation and job offer availability. I estimate the model on a sample of women from the Health and Retirement Study by efficient method of moments. The estimates indicate that intertemporal tradeoffs matter considerably. In particular, women face low probabilities of returning to work or increasing work hours after a caregiving spell. Using the estimates, I simulate several government sponsored elder care policy experiments: a longer unpaid leave than currently available under the Family and Medical Leave Act of 1993; a paid work leave; and a caregiver allowance. The leaves encourage more work among intensive care providers since they guarantee a woman can return to her job, while the caregiver allowance discourages work. A comparison of the welfare gains generated by the policies shows that half the value of the paid leave can be achieved with the unpaid leave, and the caregiver allowance generates gains comparable to the unpaid leave.
    Keywords: Informal care, employment, dynamic discrete choice, structural estimation, Fam- ily and Medical Leave Act
    JEL: J14 J18 J22 C51
    Date: 2012–03–27
  3. By: Czajkowski, Mikołaj; Hanley, Nick; Kądziela, Tadeusz
    Abstract: There are two major ways in which solid waste can be sorted and recycled - at the household level, when households are required to sort waste into a given number of categories, or in specialized sorting facilities. Traditionally, it has been thought that sorting at the household level is an inconvenience, as it uses space and requires time and consideration. Our study provides empirical evidence to the contrary. Through a carefully designed choice experiment we collected stated choices of the members of a Polish municipalities with respect to the way their waste is sorted and how often it is collected. In the scenario of our study, respondents were informed that the waste will be sorted anyway - if not at the household level than at a specialized sorting facility. Interestingly, analysis of the preferences of members of the general public shows, that people are willing to sort waste at the household level, even if unsorted waste would be collected at no extra cost. We calculate maximum willingness to pay for collecting sorted vs. unsorted waste, as well for increased frequency of collection. Overall, our results provide encouraging evidence that most people prefer to sort waste themselves if given the choice, and thus demonstrate their pro-environment preferences, even without economic incentives to do so.
    Keywords: preference heterogeneity; consumers' motives; recycling; waste managem ent
    Date: 2012–01
  4. By: Guofang Huang (School of Management, Yale University); Ahmed Khwaja (School of Management, Yale University); K. Sudhir (School of Management, Yale University)
    Abstract: Beverage consumption occurs many times a day in response to a variety of needs that change throughout the day. In making their choices, consumers self-regulate their consumption by managing short run needs (e.g., hydration and mood pickup) with long-term goals (e.g., health). Using unique intra-day beverage consumption, activity and psychological needs data, we develop and estimate a model of high frequency consumption choices that accounts for both intra-day changes in short run needs and individual level unobserved heterogeneity in the degree of self-regulation. A novel feature of the model is that it allows for dynamics of consumption and stockpiling at the level of product attributes. The model is used to evaluate introduction of new products in the beverage category and gain insight into the linkage between self-regulation and excess consumption. Broadly, the modeling framework of balancing short run needs with long-term goals has wide ranging applications in choices where long term effects are gradual (e.g., nutrition, exercise, smoking and preventive health care).
    Keywords: Dynamic discrete choice, EM algorithm, Self-regulation, Stockpiling, Health care, Needs, Goals, Obesity, Beverages, New product introductions
    Date: 2012–03
  5. By: Holguer Xavier JARA TAMAYO
    Abstract: The aim of this paper is to analyse the effect of non-pecuniary job attributes on labour supply. We develop a discrete choice model of labour supply where the choice alternatives are characterised by bundles of hours of work and job insecurity. The parameters of the utility function are obtained using maximum simulated likelihood with Halton sequences to account for unobserved heterogeneity in preferences. We compare the predictive power and labour supply elasticities obtained with our model to those of a more traditional model where only discrete hours choices characterise a job. The results show that once job insecurity is included in the discrete choice alternatives, the predictive power of the model improves significantly. Labour supply elasticities are lower than those obtained by a traditional discrete hours model, but not significantly different. Finally, a decrease of job insecurity at work has a positive and significant effect on participation, implying that policies aimed at improving working conditions could be used to influence labour supply decisions.
    Date: 2011–10

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