nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2013‒10‒02
eight papers chosen by
Edoardo Marcucci
Universita' di Roma Tre

  1. Japanese Consumers' WTP for the Source of Electricity after the Great East Japan Earthquake By MORITA Tamaki; MANAGI Shunsuke
  2. Housing Tenure Choice and Housing Expenditures in the Czech Republic By Dagmar Špalková; Jiøí Špalek
  3. Nonparametric Analysis of Random Utility Models: Testing By Yuichi Kitamura; Jorg Stoye
  4. Trade, informal employment and labor adjustment costs By Arias, Javier; Artuc, Erhan; Lederman, Daniel; Rojas, Diego
  5. On the cost of misperceived travel time variability By Xiao, Yu; Fukuda, Daisuke
  6. How individual preferences get aggregated in groups - An experimental study By Attila Ambrus; Ben Greiner; Parag Pathak
  7. Risk Perception, Choice of Drinking Water, and Water Treatment: Evidence from Kenyan Towns By Onjala, Joseph; Ndiritu, Simon Wagura; Stage, Jesper
  8. Effect of real-time transit information on dynamic path choice of passengers By Cats, Oded; Koutsopoulos, Haris N.; Burghout, Wilco; Toledo, Tomer

  1. By: MORITA Tamaki; MANAGI Shunsuke
    Abstract: The Great East Japan Earthquake on March 11, 2011 severely damaged the Fukushima Daiichi Nuclear Power Plant, and has reminded people of the potential risk of electricity supply shortage. Japanese consumers have since also began rethinking about the source of electricity production. This paper presents the results of both discrete choice experiments and choice probabilities experiments to determine the citizens' willingness to pay (WTP) for residential electricity produced by natural gas, solar, wind, and nuclear, to evaluate the three energy mix scenarios presented by the government. The authors also measured the effects of the positive or negative information on nuclear energy. The results show that Japanese consumers on average have negative WTP for electricity produced by nuclear power regardless of the information they read, and that their WTP for energy mix changes is far less than price increases already planned by electric companies without any prospects on actual changes in their energy mix.
    Date: 2013–09
  2. By: Dagmar Špalková; Jiøí Špalek (Department of Public Economics, Masaryk University)
    Abstract: Choosing between rented housing and homeownership, the so called housing tenure choice, is a key decision made by each household. Therefore housing economists often seek an answer to the question which factors have an impact on this decision. The paper investigates potential tenure choice determinants using an econometric model based on the sample data. Results of the analysis, making use of the investigation of EU-SILC in the CR, have testified to the fact that tenure choice is affected by the factors similar to those in other countries – household income, marital status of the household head and household size (persons per household). By contrast, the influence of other demographic characteristics of the household head (gender or age) has not been confirmed. The econometric model has also made it possible to evaluate potential impact of these factors on housing related expenses of households. In addition to the logical influence of household income, tenure choice decisions are significantly influenced by household size and residence in Prague, particularly in the rented housing sector.
    Keywords: Housing, tenure, choice, expenditures, determinants
    JEL: D12 P36 R21
    Date: 2013–08
  3. By: Yuichi Kitamura (Cowles Foundation, Yale University); Jorg Stoye (Dept. of Economics, Cornell University)
    Abstract: This paper develops new tools for the analysis of Random Utility Models (RUM). The leading application is stochastic revealed preference theory, that is, the modeling of aggregate choice behavior in a population characterized by individual rationality and unobserved heterogeneity. We test the null hypothesis that a repeated cross-section of demand data was generated by such a population, without restricting unobserved heterogeneity in any form whatsoever. Equivalently, we empirically test McFadden and Richter's (1991) Axiom of Revealed Stochastic Preference (ARSP, to be defined later), using only nonsatiation and the Strong Axiom of Revealed Preference (SARP) as restrictions on individual level behavior. Doing this is computationally challenging. We provide various algorithms that can be implemented with reasonable computational resources. Also, new tools for statistical inference for inequality restrictions are introduced in order to deal with the high-dimensionality and non-regularity of the problem at hand.
    Keywords: Stocastic rationality
    JEL: C14
    Date: 2013–07
  4. By: Arias, Javier; Artuc, Erhan; Lederman, Daniel; Rojas, Diego
    Abstract: Informal employment is ubiquitous in developing countries, but few studies have estimated workers'switching costs between informal and formal employment. This paper builds on the empirical literature grounded in discrete choice models to estimate these costs. The results suggest that inter-industry labor mobility costs are large, but entry costs into informal employment are significantly lower than the costs of entry in formal employment. Simulations of labor-market adjustments caused by a trade-related fall in manufacturing goods prices indicate that the share of informally employed workers rises after liberalization, but this is due to entry into the labor market by previously idle labor.
    Keywords: Labor Markets,Labor Policies,Economic Theory&Research,Work&Working Conditions,Labor Standards
    Date: 2013–09–01
  5. By: Xiao, Yu; Fukuda, Daisuke
    Abstract: Recent studies show that traveler’s scheduling preferences compose a willingness-to-pay function directly corresponding to aggregate measurement of travel time variability under some assumptions. This property makes valuation on travel time variability transferable from context to context, which is ideal for extensive policy evaluation. However, if respondents do not exactly maximizing expected utility as assumed, such transferability might not hold because two types of potential errors: (i) scheduling preference elicited from stated preference experiment involving risk might be biased due to misspecification and (ii) ignoring the cost of misperceiving travel time distribution might result in undervaluation. To find out to what extent these errors matter, we reformulate a general scheduling model under rank-dependent utility theory, and derive reduced-form expected cost functions of choosing suboptimal departure time under two special cases. We estimate these two models and calculate the empirical cost due to misperceived travel time variability. We find that (i) travelers are mostly pessimistic and thus tend to choose departure time too earlier to bring optimal cost, (ii) scheduling preference elicited from stated choice method could be quite biased if probability weight- ing is not considered and (iii) the extra cost of misperceiving travel time distribution contributes trivial amount to the discrepancy between scheduling model and its reduced form.
    Keywords: travel time variability, scheduling delay, departure time choice, rank-dependent utility
    JEL: D61 D81 R41
    Date: 2013–09–22
  6. By: Attila Ambrus (Department of Economics, Duke University); Ben Greiner (School of Economics, Australian School of Business, the University of New South Wales); Parag Pathak (Department of Economics, Massachusetts Institute of Technology)
    Abstract: This paper experimentally investigates how individual preferences, through unrestricted deliberation, get aggregated into a group decision in two contexts: reciprocating gifts, and choosing between lotteries. In both contexts we find that median group members have a significant impact on the group decision, but particular other members also have some influence. Non-median members closer to the median tend to have more influence than other members. By investigating the same individual’s influence in different groups, we find evidence for relative position in the group having a direct effect on influence. We do not find evidence that group choice exhibits a shift in a particular direction that is independent of member preferences and caused by the group decision context itself. We also find that group deliberation not only involves bargaining and compromise, but it also involves persuasion: preferences tend to shift towards the choice of the individual’s previous group, especially for those with extreme individual preferences.
    Keywords: group decision-making, role of deliberation, social influence
    JEL: C72 C92 H41
    Date: 2013–09
  7. By: Onjala, Joseph; Ndiritu, Simon Wagura; Stage, Jesper
    Abstract: This study uses household survey data from four Kenyan towns to examine the effect of households’ characteristics and risk perceptions on their decision to treat/filter water as well as their choice of main drinking water source. Because the two decisions may be jointly made by the household, a seemingly unrelated bivariate probit model is estimated. It turns out that treating non-piped water and using piped water as a main drinking water source are substitutes. The evidence supports the finding that perceived risks significantly correlate with a household’s decision to treat/filter unimproved non-pipe water before drinking it. The study also finds that higher connection fees reduce the likelihood of households connecting to the piped network. Because the current connection fee acts as a cost hurdle that deters households from getting a connection, the study recommends a system where households pay the connection fee in instalments, through a prepaid water scheme or through a subsidy scheme.
    Keywords: separated by commas
    Date: 2013–07–24
  8. By: Cats, Oded (KTH); Koutsopoulos, Haris N. (KTH); Burghout, Wilco (KTH); Toledo, Tomer (Technion – Israel Institute of Technology)
    Abstract: Real-time information is increasingly being implemented in transit networks worldwide. The evaluation of the effect of real-time information requires dynamic modeling of transit operations and of passenger path choices. This paper presents a dynamic transit analysis and evaluation tool that represents time-tables, operation strategies, real-time information, adaptive passenger choices, and traffic dynamics at the network level. Transit path choices are modeled as a sequence of boarding, walking and alighting decisions that passengers undertake when carrying out their journey. The model is applied to the Metro network of Stockholm, Sweden area under various operating conditions and information provision scenarios, as a proof of concept. An analysis of the results indicates substantial path choice shifts and potential time savings associated with more comprehensive real-time information provision and transfer coordination improvements.
    Keywords: Real-time information; Public transport; Route choice; Simulation
    JEL: R40
    Date: 2013–09–27

This nep-dcm issue is ©2013 by Edoardo Marcucci. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.