nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2012‒10‒20
five papers chosen by
Philip Yu
Hong Kong University

  1. Making Sen’s capability approach operational. A random scale framework By John K. Dagsvik
  2. Estimating random coefficients logit demand models using aggregate data By David Vincent
  3. Estimation of Dynamic Discrete Choice Models in Continuous Time By Peter Arcidiacono; Patrick Bayer; Jason R. Blevins; Paul B. Ellickson
  4. Using Contingent Choice Surveys to Inform National Park Management By Turner, Robert
  5. Do status quo choices reflect preferences? Evidence from a discrete choice experiment in the context of water utilities' investment planning By Bruno Lanz; Allan Provins

  1. By: John K. Dagsvik (Statistics Norway)
    Abstract: Amartya Sen has developed the so-called capability approach to meet the criticism that income alone may be insufficient as a measure of economic inequality. This is because knowledge about people’s income does not tell us what they are able to acquire with that income. For example, people with the same income may not have the same access to health and transportation services, schools and opportunities in the labor market. Recently, there has been growing interest in empirical studies based on the capability approach. Most of these, however, are only loosely related to quantitative behavioral theory, at least in a concrete and empirically operational way. The purpose of this paper is to demonstrate that the theory of random scale (utility) models (RSM) offers a powerful theoretical and empirical framework for representing and accounting for key aspects of Sen’s theory.
    Keywords: Capability approach; random scale; Discrete choice; Welfare function
    JEL: C25 C35 D31 D63
    Date: 2012–10
  2. By: David Vincent (Deloitte LLP, London)
    Abstract: Discrete choice demand models are popular in applied analysis and can be estimated using market-level data on product shares and characteristics. The random parameters logit model is an extension to the traditional specification and can accommodate heterogeneity in consumer preferences and rich patterns of substitution over a large number of products. The purpose of this presentation is to set out a Stata program that estimates the parameters of this model by using the algorithm proposed by Berry, Levinsohn, and Pakes (Econometrica, 1995) and that can also address the potential issues of price endogeneity. The estimator is coded in Mata and involves an inner-loop contraction mapping to invert the market shares, followed by an outer loop search over the parameters that minimizes a GMM objective function. The estimator allows the user to specify the variables that have random parameters and contains an additional option to generate a matrix of own and cross-price elasticities of demand.
    Date: 2012–09–22
  3. By: Peter Arcidiacono; Patrick Bayer; Jason R. Blevins; Paul B. Ellickson
    Abstract: This paper provides a method for estimating large-scale dynamic discrete choice models within a continuous time framework. An advantage of our model is that state changes occur sequentially, rather than simultaneously, avoiding a substantial curse of dimensionality that arises in multi-agent settings. Eliminating this computational bottleneck is the key to providing a seamless link between estimating the model and performing post-estimation counterfactuals. While recently developed two-step estimation techniques have made it possible to estimate large-scale problems, solving for equilibria remains computationally challenging. By modeling decisions in continuous time, we are able to take advantage of the recent advances in estimation while preserving a tight link between estimation and policy experiments. We address the most commonly encountered situation in empirical work in which only discrete-time data are available and the actual sequence of events that occur between two points in time is unobserved. We apply our techniques to examine the effects of Walmart’s entry into the retail grocery industry, showing that even the threat of entry by Walmart has a substantial effect on market structure.
    JEL: C13 C35 L11 L13
    Date: 2012–10
  4. By: Turner, Robert (Department of Economics, Colgate University)
    Abstract: Contingent choice surveys, in which respondents rate or rank alternative scenarios describing potential futures composed of varying levels of several different attributes, can help national park managers by identifying the preferences of visitors and also the nonuse values generated by park attributes. Many alternative combinations of park attributes can be explored efficiently, helping park managers to identify promising alternatives to be explored further during park planning processes. The surveys can be integrated easily into multiple stages of the existing National Park Service planning process. Another benefit of using contingent choice surveys in park planning is that it will foster interdisciplinarity. This paper describes National Park Service management policies and how contingent choice techniques can be integrated into them. A description of the different steps of a contingent choice analysis follows. Examples from Acadia National Park and North Cascades National Park illustrate the technique. The paper ends with a discussion of issues that future research should address.national park, management, contingent choice, choice experiments, nonuse values
    Keywords: national park, management, contingent choice, choice experiments, nonuse values
    JEL: C83 H41 Q51
    Date: 2012–09
  5. By: Bruno Lanz (Department of Management, Technology and Economics, ETH Zurich, Switzerland); Allan Provins (Economics for the Environment Consultancy, London, UK)
    Abstract: Discrete choice experiments are increasingly being used to assess preferences for services provided by regulated utilities. A commonly observed tendency of customers to opt for the status quo option may signal unwillingness to trade-off changes in service levels with bills, questioning the welfare theoretic interpretation of stated choices. In this paper, we examine status-quo choices and systematic non-trading behaviour in a discrete choice experiment encompassing a wide range of water-related service attributes. Our analysis is novel in several dimensions. First, we use a split sample design to vary the description of the status quo and the survey administration mode (online vs. in person). Second, we define service attributes to span both improvements and deterioration, so that the status quo is not necessarily the least-cost alternative. Third, we elicit information about the perception of the status quo and the impact of service attributes on day-to-day activities. Our results suggest that status quo choices largely reflect preferences.
    Keywords: cost-benefit analysis, regulated utilities, economic valuation, discrete choice experiments, individual decision making, status quo effects
    JEL: C3 C35 D H4 L4 L43 L9 L95 Q Q5 Q51 Q58 Q2 Q25
    Date: 2012–09

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