nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2013‒04‒13
ten papers chosen by
Edoardo Marcucci
Universita' di Roma Tre

  1. Easy and flexible mixture distributions By Fosgerau, Mogens; Mabit, Stefan
  2. The sources of preference heterogeneity for nature restoration scenarios By De Valck, Jeremy; Vlaeminck, Pieter; Liekens, Inge; Aertsens, Joris; Chen, Wendy; Vranken, Liesbet
  3. Euler Equations for the Estimation of Dynamic Discrete Choice Structural By Aguirregabiria, Victor; Magesan, Arvind
  4. Compensated Labor Supply Probabilities and Slutsky Elasticities in Discrete Labor Supply Models By Strom Steinar; Locatelli Marilena; Dagsvik John K.
  5. Steady-State Labor Supply Elasticities: An International Comparison By Olivier Bargain; Andreas Peichl
  6. Residential Energy Demand: a Multiple Discrete-Continuous Extreme Value Model using Italian Expenditure Data By Frontuto Vito
  7. Comparing the Determinants of Mode Choice across Travel Purposes By Driscoll, Áine; Lyons, Sean; Morgenroth, Edgar; Nolan, Anne
  8. Determinants of Mobile Phone Customer Satisfaction in the Kurdistan Region of Iraq By Nabaz T. Khayyat; Almas Heshmati
  9. As Easy as Pie: How Retirement Savers use Prescribed Investment Disclosures By Hazel Bateman; Isabella Dobrescu; Ben R. Newell; Andreas Ortmann; Susan Thorp
  10. Household Interaction and the Labor Supply of Married Women By Eckstein, Zvi; Lifshitz, Osnat

  1. By: Fosgerau, Mogens; Mabit, Stefan
    Abstract: We propose a method to generate flexible mixture distributions that are useful for estimating models such as the mixed logit model using simulation. The method is easy to implement, yet it can approximate essentially any mixture distribution. We test it with good results in a simulation study and on real data.
    Keywords: Mixture distributions; mixed logit; simulation; maximum simulated likelihood
    JEL: C14 C15 C25
    Date: 2013
  2. By: De Valck, Jeremy; Vlaeminck, Pieter; Liekens, Inge; Aertsens, Joris; Chen, Wendy; Vranken, Liesbet
    Abstract: Due to the steady reduction of nature sites in urbanised regions, nature restoration projects are now a focal point of public interest. Policy-makers are required to balance public preferences for nature sites, with the high costs of nature restoration projects. Landscape preferences are, in general, positively correlated with ecological preferences. However this relationship is far from straightforward. Past studies show that different factors, such as personal, site-specific and spatial characteristics, influence preferences, while at the same time, little is known about the relative importance of these factors. This article proposes a conceptual approach for gaining insights into preference heterogeneity, in the context of stated preference environmental valuation studies. We conduct a choice experiment at the Drongengoed (Belgium); an afforested heathland with a diversified mosaic of natural habitats. The experiment determines public preferences towards nature restoration scenarios and illustrates the public’s willingness-to-pay for a change from the current state to a scenario with less coniferous trees, higher biodiversity and good maintaining of accessibility. Area-specific and socio-demographic characteristics are controlled for and affect the preferences for certain types of nature restoration scenarios. Preference heterogeneity is also observed for most of the choice attributes, suggesting that more sophisticated modelling methods are needed.
    Keywords: choice experiment, nature, restoration, ecosystem services, preference heterogeneity, Environmental Economics and Policy,
    Date: 2012
  3. By: Aguirregabiria, Victor; Magesan, Arvind
    Abstract: We derive marginal conditions of optimality (i.e., Euler equations) for a general class of Dynamic Discrete Choice (DDC) structural models. These conditions can be used to estimate structural parameters in these models without having to solve for or approximate value functions. This result extends to discrete choice models the GMM-Euler equation approach proposed by Hansen and Singleton (1982) for the estimation of dynamic continuous decision models. We first show that DDC models can be represented as models of continuous choice where the decision variable is a vector of choice probabilities. We then prove that the marginal conditions of optimality and the envelope conditions required to construct Euler equations are also satisfied in DDC models. The GMM estimation of these Euler equations avoids the curse of dimensionality associated to the computation of value functions and the explicit integration over the space of state variables. We present an empirical application and compare estimates using the GMM-Euler equations method with those from maximum likelihood and two-step methods.
    Keywords: Dynamic discrete choice structural models; Euler equations; Choice probabilities.
    JEL: C13 C35 C51 C61
    Date: 2013–04–10
  4. By: Strom Steinar; Locatelli Marilena; Dagsvik John K. (University of Turin)
    Abstract: This paper discusses the calculation of compensated choice probabilities in random utility models. The methodology of Compensating Variation and Compensated Choice Probability was developed recently by Dagsvik and Karlström (2005). In this paper we demonstrate how one can apply this methodology in practice. In particular, we compute compensated labor supply probabilities and Slutsky elasticities in a particular discrete labor supply mode
    Date: 2013–02
  5. By: Olivier Bargain (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS, and IZA); Andreas Peichl (IZA, U. of Cologne, CESifo and ISER)
    Abstract: This note provides an extensive survey of studies estimating steady-state labor supply elasticities for Western Europe and the US. Differences are driven by the heterogeneity in work preferences across countries and by methodological difference across studies (data, selection or model estimation and specification). While the former exists but is shown to be relatively small (Bargain et al., 2013), we focus here on modeling choices: Large elasticities are mainly found in studies estimated in the 1980s and relying on the Hausman approach. More recent estimates based on discrete-choice models with tax-benefit simulations show smaller and more similar estimates across countries. While we confirm that elasticities decline over time in the US, there is some evidence that both time effect and modeling choices affect estimates for Europe.
    Keywords: household labor supply, elasticity, taxation, Europe, US.
    JEL: C25 C52 H31 J22
    Date: 2013–03–27
  6. By: Frontuto Vito (University of Turin)
    Abstract: The economic analysis of energy consumption is mostly focused on single components of total expenditure in energy-consuming services. The discrete-continuous models, following the formulation of Hanemann (1984), consider the case of perfect substitute goods: the maximization process leads to extreme corner solutions in which only one alternative is selected. According to this model the literature on energy consumption is limited to study some components of total energy consumption, i.e. space and water heating or transportation. Following the path opened by Pinjari and Bhat (2010), the goal of this paper is to build a multiple discrete-continuous model of residential energy demand based on Italian expenditure data. A non-linear utility structure, originally used in Kim et al. (2002) and extended in Bhat (2005), is implemented within the Kuhn-Tucker multiple-discrete economic model of consumer demand proposed by Wales and Woodland (1983). The paper here presented is the first application of this model to Italian expenditure data. The model predict parameters stability over time and low price elasticities for electricity (0.56) and natural gas (1.17). Considerble variations in natural gas expenditures (+54%) are predicted in case of climate changes measured of increases in Heating Degree Days (+15%).
    Date: 2012–02
  7. By: Driscoll, Áine; Lyons, Sean; Morgenroth, Edgar; Nolan, Anne
    Abstract: This paper considers travel mode choice for a range of journey purposes in Ireland using micro-data for 2009. Results suggest that demographic and socio-economic variables, location and public transport availability are important determinants of mode choice. The results also indicate an attachment to the car as a mode of transport for non-commuting journeys when available, and especially when used regularly for work journeys. Importantly, the determinants of mode choice are found to differ across journey purposes suggesting that it is not valid to generalise the results from studies considering only one journey purpose.
    Keywords: Mode choice; travel purpose; model comparison
    JEL: C25 D12 R22 R41
    Date: 2013–04
  8. By: Nabaz T. Khayyat (College of Engineering, Seoul National University); Almas Heshmati (College of Economics, Sogang University)
    Abstract: This study examines the customer satisfaction of telecomm-unication service in the Kurdistan region of Iraq. The purpose is to identify the key factors determining the customer satisfaction of telecommunication service. A conceptual model is specified and a number of hypotheses tested with a sample of 1,458 Kurdish mobile phone users in 2010. Discrete choice methodology is used to test three models of user satisfaction: Binomial logit model for overall satisfaction, and multinomial logit model for brand use and for handset preferred features. Overall the findings show that the Kurdish customers are generally satisfied with purchased mobile telecomm-unication service. The findings have implications for competition in the market and flows of investment resources to targeted market segments with potential expansion.
    Keywords: Logit model, Mobile Telecommunication, Customer Satisfaction, Service Providers, Kurdistan Region, Iraq.
    JEL: C25 C51 C81 L96 N35
    Date: 2012–09
  9. By: Hazel Bateman (School of Risk and Actuarial Studies, University of New South Wales); Isabella Dobrescu (CEPAR and School of Economics, University of New South Wales); Ben R. Newell (School of Psychology, University of New South Wales); Andreas Ortmann (School of Economics, University of New South Wales); Susan Thorp (Finance Discipline Group, UTS Business School, University of Technology, Sydney)
    Abstract: : We report the results of two laboratory experiments that study how university student and staff participants chose retirement savings investment options using ?user-friendly? information prescribed by regulators. We demonstrate that choices of more than 20% of participants cannot be predicted using any of the prescribed information items but that 30% of participants used all, or almost all, items, frequently in unexpected ways. A pie-chart showing asset allocation had the largest marginal impact on investment choices. Participants preferred options with more segmented pies (lower concentration) and with equally sized segments (lower deviation froma 1/n allocation). This choice behavior is consistent with the application of a simple diversification heuristic. Participants cannot choose more than one investment but are guided by the extent to which a pre-mixed investment option appears evenly balanced across asset classes. This novel application of a 1/n strategy is distinct from existing findings of na?ve diversification in ?mix-it-yourself? conditions where participants spread resources evenly across funds or categories. The results highlight that information contained in prescribed investment disclosures may not be used in the manner intended by the regulator. The results also pose interesting methodological questions about the way ?user-friendly? information prescribed by regulators is validated before being legislated.
    Keywords: consumer finance; diversification heuristics; pensions; choice experiment
    JEL: G11 D14 C91
    Date: 2013–03–01
  10. By: Eckstein, Zvi; Lifshitz, Osnat
    Abstract: Changing social norms, as reflected in the interactions between spouses, are hypothesized to affect the employment rates of married women. A model is built in order to estimate this effect, in which the employment of married men and women is the outcome of an internal household game. The type of the household game is exogenously determined as either Classical or Modern. In the former type of household, the spouses play a Stackelberg leader game in which the wife’s labor supply decision is based on her husband’s employment outcome while the latter type of household is characterized by a symmetric and simultaneous game that determines the spouses’ joint labor supply as Nash equilibrium. Females in Modern households are predicted to have higher employment rates than women in Classical households if they have narrower labor market opportunities and/or higher relative risk aversion. The household type is exogenously determined when the couple gets married and is treated as unobserved heterogeneity. The model is estimated using the Simulated Moments Method (SMM) and data from the Panel Study of Income Dynamics (PSID) survey for the years 1983-93. The estimated model provides a good fit to the trends in employment rates and wages. We estimate that 38 percent of households are Modern and that the participation rate of women in those households is almost 80 percent, which is about 10 higher than in Classical households. Meanwhile, the employment rate among men is almost identical in the two types of household.
    Keywords: dynamic discrete choice; household game; household labor supply
    JEL: E24 J2 J3
    Date: 2013–01

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