nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2014‒06‒28
twelve papers chosen by
Edoardo Marcucci
Universita' di Roma Tre

  1. Assessing Farmers' Willingness to Accept "Greening": Insights from a Discrete Choice Experiment in Gremany By Latacz-Lohmann, Uwe; Schulz, Norbert; Breustedt, Gunnar
  2. Demand for carbon-neutral food – evidence from a Discrete Choice Experiment for milk and apple juice By Breustedt, Gunnar
  3. Niche Markets for Agrobiodiversity Conservation: Preference and Scale Heterogeneity Effects on Nepalese Consumers’ WTP for Finger Millet Products. By Giacomo Pallante; Adam Drucker
  4. Willingness to pay for Drought Tolerance (DT) in Maize in Communal Areas of Zimbabwe By Kassie, Girma T.; Abdulai, Awudu; MacRobert, John; Abate, Tsedeke; Shiferaw, Bekele; Tarekegne, Amsal; Maleni, Debrah
  5. Government policies in changing climate and the demand for crop insurance By Liesivaara, Petri; Myyrä, Sami
  6. A generalized panel data switching regression model By Malikov, Emir; Kumbhakar, Subal C.
  7. Confidence Models of Incomplete Preferences By McClellon, M.
  9. Do experimental protocols in Conjoint Analysis matter in non Hypothetical settings? By Yangui, A.; Akaichi, F.; Costa-Font, M.; Gil, J. M.
  10. Adoption of greenhouse gas mitigation in agriculture: an analysis of dairy farmers’ preferences and adoption behaviour By Glenka, Klaus; Eorya, Vera; Colombo, Sergio; Barnes, Andrew
  11. Intensify, diversify, opt-out: testing farmer stated intentions to past and future CAP reform scenarios By Barnes, Andrew; Toma, Luiza; Mathews, Keith; Sutherland, Lee-Ann; Thomson, Steven
  12. Determinants of Eco-innovation from a European-wide Perspective - an Analysis based on the Community Innovation Survey (CIS). By Jens Horbach

  1. By: Latacz-Lohmann, Uwe; Schulz, Norbert; Breustedt, Gunnar
    Abstract: This paper explores farmers’ prospective responses to the “greening” of the Common Agricultural Policy. The analysis is based on discrete choice experiments with 128 German farmers. Participants were asked to choose between a “greening” option with a given set of management prescriptions and an “opt-out” alternative with a stipulated cut of the single direct payment. A binary logit model is used to identify the variables affecting the likelihood of “greening” being chosen. In addition, latent class estimations are carried out to group respondents into latent classes of “compliers” and “non-compliers”. We find that farmers” choices are driven by “greening” policy attributes, personal and farm characteristics, and interactions between these two groups of variables. Farmers perceive “greening” as a costly constraint, but not all farmers are equally affected and not all “greening” provisions are regarded as equally demanding. Specialised arable farms on highly productive land and intensive dairy farms are most likely to opt out of “greening” and voluntarily forgo part of their single payment entitlements. The paper concludes with a set of recommendations for improving the design of a second-best policy.
    Keywords: Greening, Common Agricultural Policy, discrete choice modelling, latent class estimation, Agricultural and Food Policy, Farm Management, Q18, Q24,
    Date: 2014–04
  2. By: Breustedt, Gunnar
    Abstract: To internalize climate-related external costs from agricultural production and food consumption Pigou taxes and carbon credits increase private costs for food. Voluntary consumer choices for carbon-neutral food can be advantageous over such policy measures since they avoid higher food prices for the poor. We empirically analyze consumers’ willingness-to-pay for hypothetical carbon-reduced as well as carbon-neutral milk and apple juice. Data are collected in Discrete Choice Experiments in a German supermarket. Estimates reveal a substantial price premium for the carbon-neutral products which is probably sufficient to cover the products’ extra costs, including the purchase of carbon credits. The premiums are around 0.20 € per liter milk and 0.30 € per liter apple juice. Although the external validity of stated-preference methods is limited the willingness-to-pay measures for organic milk and juice as well as for different real-world labels in our experiment are similar to real-world price premiums.
    Keywords: climate change, carbon-neutral food, discrete-choice-experiment, Consumer/Household Economics, Environmental Economics and Policy, Food Consumption/Nutrition/Food Safety, Research and Development/Tech Change/Emerging Technologies, Research Methods/ Statistical Methods, Q54, Q130, Q180,
    Date: 2014–04
  3. By: Giacomo Pallante (Department of Economics and Finance, University of Rome Tor Vergata, Via Columbia 2, Rome, Italy.); Adam Drucker (Bioversity International, Via dei Tre Denari 472, Maccarese, Italy.)
    Abstract: Through the implementation of a choice experiment among Nepalese urban consumers, this paper aims to evaluate the effectiveness of a niche product development as market-oriented instrument for the conservation of endangered crops landraces. We compare establisheddiscrete choice models (conditional logit, random parameter logit and latent class) with the novel generalized multinomial logit model in WTP space to account for the preference and the scale heterogeneity effect on the WTP for the finger millet crop. The estimations are utilized to evaluate the impact that a potential price premium has on local rural farmers’ opportunity costs of cultivating the finger millet. Results confirm that, by controlling for heterogeneity, there are segments of population with a WTP that ensures an efficient increase in FM area cultivated. Further, the success of the niche market can attract public investments on the development and conservation of the entire stock of neglected and underutilized local species thereby safeguarding the related agrobiodiversity ecosystem services.
    Keywords: Agricultural biodiversity, niche market,Nepal, choice experiment, scale heterogeneity, WTP.
    JEL: Q18 Q21 Q26
    Date: 2014–05
  4. By: Kassie, Girma T.; Abdulai, Awudu; MacRobert, John; Abate, Tsedeke; Shiferaw, Bekele; Tarekegne, Amsal; Maleni, Debrah
    Abstract: This study aimed at estimating the implicit prices farmers are willing to pay (WTP) for maize traits with deliberate focus on drought tolerance. Using choice experiment, we generated 12600 observations from a random sample of 1400 households in communal areas within 14 districts of Zimbabwe. Taste parameters and heterogeneities (scale and residual taste) were estimated using the generalized multinomial logit model (G-MNL) and its different versions. Drought tolerance, grain yield, large grain size, covered cob tip, big cob and semi flint texture were the most preferred traits by rural Zimbabweans. The WTP values were estimated using the WTP space approach. Sample farmers are, for example, willing to pay a premium for drought tolerance that is 1.75 times the amount they are willing to pay for an increase of 1 ton in grain yield per acre, 8.3 times the value they attach for a change from small to big cob size, and 14.7 times the willingness to pay for semi-flint texture over dent texture of maize. The uncertainty that DT might not be appealing to poor farmers as much as some other technologies can only be cleared only if the promotion of DT materials is done in the right manner and to the right farm community. Innovative ways of promoting DT maize vis-à-vis creating awareness in contextual understanding of drought and drought risk shall be employed to enhance adoption of new DT maize varieties by risk prone farming communities. Given the high level of rural literacy and the high rate of adoption of improved maize in Zimbabwe, trait based promotion and marketing of varieties would be the right strategy.
    Keywords: DT maize, choice experiment, WTP space, G-MNL, Zimbabwe, Agribusiness, Crop Production/Industries, Demand and Price Analysis, International Relations/Trade, Research Methods/ Statistical Methods, B41, C25, D03, D12, O13, O33, Q12,
    Date: 2014–04
  5. By: Liesivaara, Petri; Myyrä, Sami
    Abstract: Crop insurance markets are exposed to unpredictable weather conditions. Yield risks are systemic in nature, and public intervention is often a necessity for the functioning private crop insurance markets. Climate change is expected to increase catastrophic weather events and yield volatility. This paper addresses the question how government actions related to extreme weather events affect the demand and farmers willingness to pay for crop insurance products. The analysis is based on farmers’ stated preferences with split data approach. Our results reveal that farmers’ willingness to pay for crop insurance was different when government disaster relief was possible compared to the situation where disaster relief was not possible. Results show that possibility for disaster relief payments in catastrophic event will lead to extensive misuse of taxpayers’ money if crop insurance premiums are subsidized simultaneously.
    Keywords: disaster relief, crop insurance, choice experiment, willingness to pay, Crop Production/Industries, Demand and Price Analysis, Environmental Economics and Policy, Q12, Q18, G22,
    Date: 2014–04
  6. By: Malikov, Emir; Kumbhakar, Subal C.
    Abstract: This paper considers a generalized panel data model of polychotomous and/or sequential switching which can also accommodate the dependence between unobserved effects and covariates in the model. We showcase our model using an empirical illustration in which we estimate scope economies for the publicly owned electric utilities in the U.S. during the period from 2001 to 2003.
    Keywords: Correlated Effects, Multinomial Logit, Nested Logit, Panel Data, Polychotomous, Selection
    JEL: C33 C34
    Date: 2014–05–28
  7. By: McClellon, M.
    Abstract: This paper introduces and axiomatizes a new class of representations for incomplete preferences called confidence models. Confidence models describe decision makers who behave as if they have probabilistic uncertainty over their true preferences, and are only willing to express a binary preference if it is sufficiently likely to hold. Confidence models are flexible enough to model behavior on a variety of domains, and they are general enough to nest the popular multi-utility models of incomplete preferences. Most importantly, they provide a natural way to connect incomplete preferences with stochastic choice. This connection is characterized by a simple condition that serves to identify the behavioral content of incomplete preferences.
    Date: 2014–01
  8. By: CEMBALO, Luigi; PASCUCCI, Stefano; TAGLIAFIERRO, Carolina; CARACCIOLO, Francesco
    Abstract: The topic of integration and development of sustainable chains has lately gained much attention in the academia debates. In particular, how to manage integration in the bio-energy chains is discussed. Integration is a process of progressive dependence among different actors willing to coordinate processes of innovation. This dynamic is generated by the interaction of individuals willing to start up collective action. The effectiveness of a collective action depends on the number of formal norms developed by collective contracts. This paper tackles these issues considering the specific case study of a collective action in a bio-energy chain. It focuses on the decision-making process of farmers on whether to join or not a collective action, analysing their trade-offs over the attributes of collective contracts. The empirical study was conducted in an area in Southern Italy, most affected by soil erosion problems. A stated preference model was implemented where respondents were asked to choose between alternative collective contracts with varying attribute levels to start biomass cultivation. Two hundreds face-to-face questionnaires were administered to farmers in September-October 2013. First results show that participation is mainly influenced by minimum price guaranteed, contract length, and re-negotiation before the end of a contract.
    Keywords: Agro-biomass, Choice Modelling, Contract farming, Soil erosion mitigation, Valuing contract attributes, Agribusiness, Research and Development/Tech Change/Emerging Technologies, Resource /Energy Economics and Policy, D71, D86, O13,
    Date: 2014–04
  9. By: Yangui, A.; Akaichi, F.; Costa-Font, M.; Gil, J. M.
    Abstract: This paper aims at comparing the performance of three conjoint analyses (CA) in terms of estimated partworths, predictive power and estimated WTP: choice experiment (CE); ranking conjoint analysis (RCA) and best-worst scaling (BWS). Comparisons are made in a non-hypothetical setting. For comparison purposes in the last two formats only the information on the most preferred option is considered. The hypothetical CE is used as the benchmark. Olive oil is the food product used in our experiment. Results reveal preferences regularity between samples’ responses across the formats implying not statistically differences in the marginal participants’ WTP. Moreover, in an incentive compatible context, RCA and BWS compared with CE provide similar results regarding to the in-sample and out-of-sample predictive power and also in terms of decision consistency when just only the first rank data is analyzed.
    Keywords: conjoint analysis, best worst scaling, external validity, experimental economics, hypothetical bias, Marketing, Research Methods/ Statistical Methods, C91, D12,
    Date: 2014–04
  10. By: Glenka, Klaus; Eorya, Vera; Colombo, Sergio; Barnes, Andrew
    Abstract: Greenhouse gas mitigation in agriculture implies changes in farm management practices. Knowledge on farmers’ current adoption of management practices aimed at reducing emissions, and their preferences regarding these, is important to inform the development of robust climate change mitigation policies in the agricultural sector. In the context of Scottish dairy farms, this study combines information on current adoption of mitigation practices with preference information based on Best-Worst-Scaling to facilitate the choice of mitigation practices to support via policy mechanisms that encourage and incentivise change. We find that current adoption plays an important role in understanding preference rankings of mitigation practices, and identify promising mitigation practices based on their potential for additional emission reduction, their perceived contribution to the farm’s financial and environmental performance and information on their cost-effectiveness.
    Keywords: Climate change, Mitigation, Best-Worst-Scaling, Stated preferences, Technology adoption, Dairy farming, Agribusiness, Environmental Economics and Policy, Livestock Production/Industries, Research and Development/Tech Change/Emerging Technologies, Q19, Q54, D03,
    Date: 2014–04
  11. By: Barnes, Andrew; Toma, Luiza; Mathews, Keith; Sutherland, Lee-Ann; Thomson, Steven
    Abstract: A series of studies have explored the future intentions of farm households to reforms of the Common Agricultural Policy (CAP). This paper explores the intentions of Scottish livestock farmers under proposed reforms and, using the path dependency model, estimates the effect of past decisions on determining future intentions. A large representative telephone based survey of livestock farmers was conducted over the Summer of 2013. This yielded a response rate of 1,764 observations from livestock based holdings in Scotland. A multinomial logistic regression was used to estimate the influence of various factors on either increasing or decreasing activity in agricultural and non-agricultural related areas. Whilst hypothesised increases in payment will lead to an intention to increase activity, a reduction in payment, in some cases, also leads to stated increases in activity both in agricultural and non-agricultural enterprises. We find that the most powerful predictors of change are response to past reform, farmer age and the identification of a successor within the farm household. This latter variable is highly significant and may negate concerns over uncertainty within short-term policy planning scenarios. Overall we argue for more appreciation of longer term trajectories of change at the farm level.
    Keywords: Farmer intentions, Common Agricultural Policy, Path Dependency, Multinomial logistic regression, Intensify, diversify, opt-out: testing farmer stated intentions to past and future CAP reform scenarios, Agribusiness, Agricultural and Food Policy, Research Methods/ Statistical Methods, Q18, Q15, D81,
    Date: 2014–04
  12. By: Jens Horbach (University of Applied Sciences, Augsburg.)
    Abstract: Eco-innovations lead to less environmental impacts or to a reduction of energy use and are therefore crucial for climate protection. Recently, the determinants of eco-innovation activities have been widely explored for single countries but there is still a lack of country comparisons mainly because of data restrictions. In 2009, a special module on eco-innovation has been included in the Community Innovation Survey (CIS) allowing a comparison of the determinants of eco-innovation in 19 different European countries. Our analysis especially focuses on Eastern European transformation countries because the determinants of eco- innovation in these countries have not yet been systematically analyzed. Concerning the introduction of eco-innovation, the econometric analysis shows that regulation activities seem to be more important for Eastern European countries. This is especially the case for 'traditional fields'such as air, noise, soil, water, recycling or dangerous substances. Except energy saving measures, environmentally related subsidies seem to be quantitatively more important for the Eastern European countries pointing to the lower financial performance of the respective firms. Furthermore, Eastern European countries are more relying on competitors and external R&D as information sources indicating a technology transfer from West to East.
    Keywords: eco-innovation, probit models, country analysis.
    JEL: Q55 O33 C25
    Date: 2014–04

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