nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2014‒02‒21
three papers chosen by
Edoardo Marcucci
Universita' di Roma Tre

  1. Valuation of small and multiple health risks: A critical analysis of SP data applied to food and water safety By Andersson, Henrik; Risa Hole, Arne; Svensson, Mikael
  2. An Optimizing Neuroeconomic Model of Discrete Choice By Michael Woodford
  3. Efficiency versus Equity in the Allocation of Medical Specialty Training Positions in Spain: A Health Policy Simulation Based on a Discrete Choice Model By Jeffrey E. Harris; Beatriz G. López-Valcárcel; Patricia Barber; Vicente Ortún

  1. By: Andersson, Henrik (Toulouse School of Economics); Risa Hole, Arne (University of Sheffield); Svensson, Mikael (Dept. of Economics)
    Abstract: This study elicits individual preferences for reducing morbidity and mortality risk in the context of an infectious disease (campylobacter) using choice experiments. Respondents are in the survey asked to choose between different policies that, in addition to the two health risks, also vary with respect to source of disease being targeted (food or water), when the policy takes place (in time), and the monetary cost. Our results in our baseline model are in line with expectations; respondents prefer the benefits of the program sooner than later, programs that reduce both the mortality and morbidity risk, and less costly programs. Moreover, our results suggest that respondents prefer water- compared with food-safety programs. However, a main objective of this study is to examine scope sensitivity of mortality risk reductions using a novel approach. Our results from a split-sample design suggest that the value of the mortality risk reduction, defined as the value of a statistical life, is SEK 3 177 (USD 483 million) and SEK 50 million (USD 8 million), respectively, in our two sub-samples. This result cast doubt on the standard scope sensitivity tests in choice experiments, and the results also cast doubt on the validity and reliability of VSL estimates based on stated preference (and revealed preference) studies in general. This is important due to the large empirical literature on non-market evaluation and the elicited values’ central role in policy making, such as benefit-cost analysis.
    Keywords: Choice experiments; Morbidity risk; Mortality risk; Scope sensitivity; Willingness to pay
    JEL: D61 H41 I18 Q51
    Date: 2014–02–06
  2. By: Michael Woodford
    Abstract: A model is proposed in which stochastic choice results from noise in cognitive processing rather than random variation in preferences. The mental process used to make a choice is nonetheless optimal, subject to a constraint on available information-processing capacity that is partially motivated by neurophysiological evidence. The optimal information-constrained model is found to offer a better fit to experimental data on choice frequencies and reaction times than either a purely mechanical process model of choice (the drift-diffusion model) or an optimizing model with fewer constraints on feasible choice processes (the rational inattention model).
    JEL: C25 C91 D87
    Date: 2014–02
  3. By: Jeffrey E. Harris; Beatriz G. López-Valcárcel; Patricia Barber; Vicente Ortún
    Abstract: Background. In Spain’s “MIR” system of allocating residency training positions, medical school graduates are ranked according to their performance on a national exam and then sequentially choose from the remaining available training slots. We studied how changes in the MIR system might address the inadequate supply of practitioners of family and community medicine in that country. Data. Our data included: a registry of the actual residency positions chosen by medical school graduates in the 2012 MIR cycle; a 2012 post-MIR survey in which graduates made counterfactual choices as to what they would have chosen but for their position in the national rankings; and a 2011 survey of the relative importance of specialty attributes among final-year medical students in the same cohort. Methods. We modeled the MIR system as a one-sided matching mechanism based priority rankings, also called “serial dictatorship.” Within this model, we developed a framework for evaluating the tradeoff between the efficiency gains from increasing the supply of practitioners of family and community medicine and the equity-related benefits of permitting the most talented medical students to make their specialty choices first. We then applied our framework to real data on medical school graduates’ specialty choices during 2012 MIR cycle. Our empirical analysis, based on the multinomial logit model with random coefficients, took account of the endogeneity of choice sets induced by the MIR scheme. We then used the parameter estimates to simulate various alternative public policies, including random ranking of candidates, restrictions on the supply of training positions, and policies designed to upgrade medical school graduates’ valuations of a career in family and community medicine. Results: Both random ranking and restrictions in supply resulted in a relatively small efficiency gains from training more productive medical school graduates in family and community medicine, but at the same time a substantial equity losses. Improvements in two key attributes of family and community medicine – professional prestige and the proportion of income from private practice – resulted in substantial gains in both equity and efficiency. Conclusions: Policies designed to increase the prestige and remuneration of practitioners of family and community medicine have the potential to be more efficient and equitable than other alternatives.
    JEL: C25 C78 D82 I11 I18
    Date: 2014–02

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