nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2012‒07‒08
four papers chosen by
Philip Yu
Hong Kong University

  1. Shannon's measure of information, path averages and the origins of random utility models in transport itinerary or mode choice analysis By Marc Gaudry; Emile Quinet
  2. What is the right profile for getting a job? A stated choice experiment of the recruitment process By Eriksson, Stefan; Johansson, Per; Langenskiöld, Sophie
  3. Has the Euro affected the choice of invoicing currency? By Jenny E. Ligthart; Sebastian E. V. Werner
  4. The role of family background in the heterogeneity of self-employment in some transition countries By Castellano, R; Punzo, G

  1. By: Marc Gaudry (AJD - Agora Jules Dupuit - Université de Montréal - Département de sciences économiques); Emile Quinet (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: We interpret the often mentioned difference between Logsum and average utility in terms of Shannon's (1948) information measure S, leading to a Path Aggregation THeorem (PATH). It states that, in transport networks where unique measures of the utility of multiple paths are required for demand model formulation purposes and the true path choice model is Multinomial Logit (MNL), constructs based on weighted averages of path characteristics derived from multipath assignments always underestimate the utility of multiple paths, a deficit exactly equal to S (corresponding to minus-one times entropy) if the weights are the path choice probabilities. We study the properties of this S measure of aggregation error, along with those arising from other types of averages of path characteristics, outlining some implications for demand estimation and project appraisal. Notably, the validity of the PATH does not depend on the specific contents of the representative utility functions (RUF) associated to paths, such as their mathematical form or their eventual inclusion of alternative-generic constants (AGC). We show by simulation that averaging modes or sub-modes ― a frequent feature of traffic modeling studies ― can lead to important error in terms of level of traffic and welfare measurement. Concerning the mathematical form of the RUF, we recall that, after the publication of Abraham's 1961 random utility model (RUM) of road path choice deriving the Probit specification based on the Gaussian error distribution (and another specification based on the Rectangular error distribution), French engineers used this seminal approach as justification of road path choice formulae then in current use and assigned the name "Abraham's Law" to a particular standard one, effectively a "Logarithmic Logit" close to the logarithmic RUF carefully specified for Logit mode choice by Warner in 1962. For transit problems, the preference went to a linear RUF, as evidenced in Barbier's casual binomial Probit application to bus and metro, published in 1966, which may have inspired the later generalizations by Domencich and McFadden. In view of many founders' conscientiously crafted nonlinear Logit formulations, and more generally of the repeatedly demonstrated presence of nonlinearity in RUF path and mode specifications since their careful work 50 years ago, we analyze the impact of such nonlinearity on S. This impact is tractable through a comparison of measures S2 and S1 associated with two path choice models differing only in RUF form, as determined by Box-Cox transformations applied to their level-of-service (LOS) variables. We show that, although the difference between measures S2 and S1 may reach a minimum or a maximum with changes in LOS, the solution for such a turning point cannot be established analytically but requires numerical methods: the demonstrable impact on S of nonlinearity, or asymmetry of Logit curve response, is tractable, but only at non trivial computational cost. We point out that the path aggregation issue, whereby aggregation of paths by Logsums differs from aggregation of their characteristics by averages, is not limited to public transit (PT) projects with more or less "common" lines competing in dense urban transit networks (our particular Paris predicament motivating the analysis) but also arises in other modes whenever distinct itineraries or lines compete within a single mode. Concerning dense urban PT networks, we hypothesize that Logsums based on multiple path assignments treating all transit means (about 10 in our problem) as one modal network should, using Ockham's razor, be simpler than the insertion of a layer of choice hierarchies among such urban means based on non nested specifications embodying assumptions on the identity of "higher" and "lower" means, the latter reasserting the multiple path access problems the hierarchies were designed to solve in the first place. Concerning road networks, the proper accounting of multiple path use to avoid Shannon aggregation error points to an abandonment of Wardrop's equilibrium in favor of Logit choice. This completed shift should favor transit when it is the minority mode.
    Keywords: Multipath assignment ; Aggregation of path characteristics ; Path aggregation ; Inclusive values ; Multinomial Logit ; Shannon's measure of information ; Origins of Random Utility Models (RUM) ; Probit ; Logarithmic Logit ; Abraham's Law of traffic assignment ; Kirchhoff's distribution ; Non linearity of Representative Utility Functions (RUF) ; Box-Cox transformations (BCT) ; French engineers ; Claude Abraham ; Stanley Warner ; Michel Barbier ; Robert Fogel ; Daniel McFadden ; Abraham-McFadden approach ; EOLE ; Paris RER E westerly extension ; Public Transit (PT) assignment ; transit hierarchies ; SAMPERS ; PRISM ; CUBE Voyager ; VISUM ; NODUS
    Date: 2012–06
  2. By: Eriksson, Stefan (Uppsala Center for Labor Studies); Johansson, Per (Uppsala Center for Labor Studies); Langenskiöld, Sophie (IFAU)
    Abstract: We study the recruitment behavior of Swedish employers using data from a stated choice experiment. In the experiment, the employers are first asked to describe an employee who recently and voluntarily left the firm, and then to choose between two hypothetical applicants to invite to a job interview or to hire as a replacement for their previous employee. The two applicants differ with respect to characteristics such as gender, age, education, experience, ethnicity, religious beliefs, family situation, weight, and health. Our results show that employers discriminate against applicants who are old, non-European, Muslim, Jewish, obese, have several children, or have a history of sickness absence. Moreover, increasing the firms’ cost of uncertainty in hiring – through more firm co-payment in the sickness benefit system – may reduce hiring, but does not affect the degree of discrimination. Also, there are only small differences in the degree of discrimination between different types of recruiters and firms. Overall, our results suggest that the discrimination, at least partially, should reflect statistical discrimination.
    Keywords: Stated choice experiment; Discrimination; Gender; Age; Ethnicity; Obesity; Sickness absence
    JEL: J71
    Date: 2012–06–26
  3. By: Jenny E. Ligthart (CentER and Department of Economics, Tilburg University, P.O. Box 90153, 5000 LE Tilburg, The Netherlands.); Sebastian E. V. Werner (Tilburg University, Warandelaan 2, 5037 AB Tilburg, The Netherlands.)
    Abstract: We present a new approach to study empirically the effect of the introduction of the euro on the pattern of currency invoicing. Our approach uses a compositional multinomial logit model, in which currency choice is explained by both currency-specific and country-specific determinants. We use unique quarterly panel data on the invoicing of Norwegian imports from OECD countries for the 1996-2006 period. We find that eurozone countries have substantially increased their share of home currency invoicing after the introduction of the euro, whereas the home currency share of non-eurozone countries fell slightly. In addition, the euro as a vehicle currency has overtaken the role of the US dollar in Norwegian imports. The substantial rise in producer currency invoicing by eurozone countries is primarily caused by a drop in inflation volatility and can only to a small extent be explained by an unobserved euro effect. JEL Classification: F33, F41, F42, E31, C25.
    Keywords: Euro, invoicing currency, exchange rate risk, inflation volatility, vehicle currencies, compositional multinomial logit.
    Date: 2012–01
  4. By: Castellano, R; Punzo, G
    Abstract: The aim of this paper is to shed light on how some determinants, especially in the spheres of family background, differently affect the heterogeneous category of self-employment across a set of transition economies of Eastern Europe, where more or less restrictive policies and different liberalization processes have been adopted over time. At this end, three-stage multinomial logit models as discrete choice models are estimated on 2005 EU-SILC data. Country-specific peculiarities of self-employment profiles are drawn and, although the occupational status is often devised in a dualist perspective, significant differentiations within the ranks of self-employed also exist.
    Keywords: Self-employment; Generational mobility; Three-stage multinomial model
    JEL: P29 J62 P51
    Date: 2012

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