nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2013‒08‒16
five papers chosen by
Edoardo Marcucci
Universita' di Roma Tre

  1. Estimating Bayesian Decision Problems with Heterogeneous Priors By Hansen, Stephen; McMahon, Michael
  2. Neighbourhood Selection of Non-Western Ethnic Minorities: Testing the Own-Group Preference Hypothesis Using a Conditional Logit Model By Boschman, Sanne; van Ham, Maarten
  3. Nonparametric analysis of random utility models: testing By Yuichi Kitamura; Jörg Stoye
  4. The logic of adaptive sequential experimentation in policy design: By Xing, Haipeng; Zhang, Xiaobo
  5. Threshold Preferences and the Environment By Ingmar Schumacher; Benteng Zou

  1. By: Hansen, Stephen (Universitat Pompeu Fabra); McMahon, Michael (University of Warwick)
    Abstract: In many areas of economics there is a growing interest in how expertise and preferences drive individual and group decision making under uncertainty.Increasingly, we wish to estimate such models to quantify which of these drive decision making. In this paper we propose a newc hannel through which we can empirically identify expertise and preference parameters by using variation indecisions over heterogeneous priors.Relative to existing estimation approaches,our"Prior Based Identification" extends the possible environments which can be estimated, and also substantially improves the accuracy and precision of estimates in those environments which can be estimated using existing methods.
    Keywords: Bayesian decision making;expertise;preferences;estimation.
    Date: 2013
  2. By: Boschman, Sanne (Delft University of Technology); van Ham, Maarten (Delft University of Technology)
    Abstract: The selective inflow and outflow of residents by ethnicity is the main mechanism behind ethnic residential segregation. Many studies have found that ethnic minorities are more likely than others to move to ethnic minority concentration neighbourhoods. An important question which remains largely unanswered is to what extent this can be explained by own group preferences, or by other neighbourhood or housing market factors. By using longitudinal register data from the Netherlands, this study contributes to the literature on neighbourhood selection by ethnic minorities in two ways. First, it distinguishes between different ethnic minority groups where most studies look at the group as a whole. Second, it takes into account multiple dimensions of neighbourhoods where most other studies look at neighbourhoods one-dimensionally, which allows us to test the own group preferences hypothesis. Using a conditional logit model we find that housing market constraints can partly explain the selection of ethnic minorities into minority concentration neighbourhoods. Also own-group preferences are found to be important in explaining neighbourhood selection. There are, however, differences between ethnic minority groups. Own-group preferences and housing market constraints together explain why Surinamese and Antilleans select into minority concentration neighbourhoods. When these factors are taken into account, Turks and Moroccans are still found to select into concentration neighbourhoods of ethnic minorities other than their own ethnic group.
    Keywords: segregation, neighbourhood selection, ethnicity, own-group preference, conditional logit, the Netherlands
    JEL: J15 R23
    Date: 2013–07
  3. By: Yuichi Kitamura (Institute for Fiscal Studies and Yale University); Jörg Stoye (Institute for Fiscal Studies and New York University)
    Abstract: This paper develops and implements a nonparametric test of Random Utility Models (RUM) using only nonsatiation and the Strong Axiom of Revealed Preference (SARP) as restrictions on individual level behaviour, allowing for fully unrestricted unobserved heterogeneity. The main application is the test of the null hypothesis that a sample of cross-sectional demand distributions was generated by a population of rational consumers. Thus, the paper provides a finite sample counterpart to the classic theoretical analysis of McFadden and Richter (1991). To do so, it overcomes challenges in computation and in asymptotic theory and provides an empirical application to the U.K. Household Expenditure Survey. An econometric result of independent interest is a test for inequality constraints when they are represented in terms of the rays of a cone rather than its faces.
    Keywords: stochastic rationality
    JEL: C14
    Date: 2013–08
  4. By: Xing, Haipeng; Zhang, Xiaobo
    Abstract: In this paper, we argue that economists can learn a great deal from the design principles implemented in medical research. We develop a theoretical model to show the logic of adaptive sequential experiment design in the presence of uncertainty over negative effects and discuss how to choose samples in a population to minimize the experiment cost. We also point out the applications of our proposed framework in the economic domain, such as economic reforms and new product design.
    Keywords: Economic development, Economy, Experiments, randomized experiment, Social Sciences, methodologies,
    Date: 2013
  5. By: Ingmar Schumacher (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, IPAG - Business School); Benteng Zou (CREA - Center for Research in Economic Analysis - Université du Luxembourg)
    Abstract: In this article we study the implication of thresholds in preferences. To model this we extend the basic model of John and Pecchenino (1994) by allowing the current level of environmental quality to have a discrete impact on how an agent trades off future consumption and environmental quality. In other words, we endogenize the semi-elasticity of utility based on a step function. We motivate the existence of the threshold based on research from political science, from arguments based on regulation and standards, cultural economics as well as ecological economics. Our results are that the location of the threshold determines both the potential steady states as well as the dynamics. For low (high) thresholds, environmental quality converges to a low (high) steady state. For intermediate levels it converges to a stable p-cycle, with environmental quality being asymptotically bounded below and above by the low and high steady state. We discuss implications for intergenerational equity and policy making. As policy implications we study shifts in the threshold. Our results are that, in case it is costless to shift the threshold, it is always worthwhile to do so. If it is costly to change the threshold, then it is worthwhile to change the threshold if the threshold originally was su ciently low. Lump-sum taxes may lead to a development trap and should be avoided if there are uncertainties about the threshold or the eff ectiveness of the policy.
    Keywords: Keywords: thresholds, endogenous preferences, environmental quality, policy intervention.
    Date: 2013–08–07

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