nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2012‒07‒23
three papers chosen by
Philip Yu
Hong Kong University

  1. Implementation of a GAP Label in a Differentiated-Product Industry: A Welfare Evaluation with a Random Coefficients Model for Mar Del Plata, Argentina By Lacaze, Maria Victoria; Gonzalez, Julia
  2. The Willingness to Pay of European Consumers for Jointly Produced Israeli – Palestinian Products By Wendler, Cordula; Liebe, Ulf; Ihle, Rico; von Cramon-Taubadel, Stephan
  3. Asymmetric Dominance, Deferral and Status Quo Bias in a Theory of Choice with Incomplete Preferences By Gerasimou, Georgios

  1. By: Lacaze, Maria Victoria; Gonzalez, Julia
    Abstract: This paper evaluates the effect on market shares and consumer surplus of the introduction of a Good Agricultural Practices (GAP)-labeled product in the frozen fried potatoes (FFP) industry. We first estimate a model of household demand in Mar del Plata, Argentina, using scanner data and demographic information. We find that higher income individuals are more concerned about health and nutrition, and that younger and lower-income consumers are more price-sensitive. Then we postulate that a properly GAP-labeled FFP is available in the market, and we assess its effect by using the estimated utility function and prior information about consumers’ declared willingness to pay (WTP) for sustainably produced potatoes. We find that the older the individual, the greater the influence of the hypothetical introduction of the GAP-labeled product; the relationship is less conclusive in the case of income. Finally, we predict the results of a greater consumer surplus extraction by fixing a higher price for the new product, and we calculate the maximum increase in the marginal cost that the firm would be able to afford if farmers charge higher prices for GAP fresh potatoes.
    Keywords: Frozen Fried Potatoes, Good Agricultural Practices, Random Coefficients Discrete Choice Model, Willingness to Pay, Welfare Evaluations, Agribusiness, Consumer/Household Economics, Industrial Organization, Marketing, L11, D12,
    Date: 2012–06–27
  2. By: Wendler, Cordula; Liebe, Ulf; Ihle, Rico; von Cramon-Taubadel, Stephan
    Abstract: Ethical aspects of food products have become increasingly important for Western European consumers. One example of such ethical consumption attributes are “peace products”, commodities produced in peaceful economic cooperation between members of conflicting parties in areas of political conflict. In the context of the Israeli-Palestinian conflict, we investigate the willingness to pay of consumers from four European countries for two food products which are jointly produced by Israelis and Palestinians. We conduct a cross country web survey including a choice experiment addressed to the four European countries. Preference heterogeneity with regard to the willingness to pay for peace building products is taken into account by including survey questions on lifestyle factors, attitudes towards Israel, Palestine and the Israel-Palestinian conflict, personal and social norms as well as socio-demographics. Using random parameter logit models we find that consumers in Great Britain and Germany are willing to pay a premium first off all for European products compared with products from Israel or the Palestinian Territories alone. The willingness to pay for Israeli/Palestinian peace products is lower compared to the surplus for European products. But the cooperation product is favored instead of a single county product, just from Israel or the Palestinian Territories. Hence, cooperation in the form of joint production of peace products would generate benefits.
    Keywords: Choice experiments, ethical consumption, Middle East conflict, willingness to pay, Community/Rural/Urban Development, International Relations/Trade, D12, M14, O57, Q13, Z13,
    Date: 2012–06–29
  3. By: Gerasimou, Georgios
    Abstract: This paper proposes a model of individual choice that does not assume completeness of the decision maker's preferences. The model helps explain in a natural way, and within a unied framework of choice in the presence of preference-incomparable options, three distinct behavioural phenomena: the asymmetric dominance/attraction effect, choice deferral and status quo bias. A decision maker who follows the decision rule featured in the model chooses an alternative from a menu if it is totally preference-undominated in that menu and at the same time is also partially preference-dominant. In situations where the decision maker's preferences are complete the model delivers strict utility maximisation.
    Keywords: Attraction Effect; Choice Deferral; Status Quo Bias; Incomplete Preferences; Bounded Rationality
    JEL: D03 D11 D01
    Date: 2012–07–07

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