nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2014‒11‒07
eleven papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Incorrectly accounting for preference heterogeneity in choice experiments: what are the implications for welfare measurement? By Catalina M. Torres; Sergio Colombo; Nick Hanley
  2. Analysis of Multiple Discrete-Continuous Choices: Empirical Evidence of Biased Price Elasticities under Standard Discrete Choice models on the Soft Drink Market By Bonnet, Céline; de Mouzon, Olivier
  3. Is Choice Experiment Becoming more Popular than Contingent Valuation? A Systematic Review in Agriculture, Environment and Health By Pierre-Alexandre Mahieu; Henrik Andersson; Olivier Beaumais; Romain Crastes; François-Charles Wolff
  4. How to reform western care payment systems according to physicians, policy makers, healthcare executives and researchers: A discrete choice experiment By KESSELS, Roselinde; VAN HERCK, Pieter; DANCET, Eline; ANNEMANS, Lieven; SERMEUS, Walter
  6. Dynamic Discrete Choice Estimation of Agricultural Land Use By Scott, Paul
  7. K-state switching models with time-varying transition distributions – Does credit growth signal stronger effects of variables on inflation? By Sylvia Kaufmann
  8. An Alternative Asymptotic Least Squares Estimator for Dynamic Games By Fabio A. Miessi Sanches; Daniel Silva Junior, Sorawoot Srisuma
  9. Social security schemes and labor supply in the formal and informal sectors By Rodrigo Ceni
  10. Facteurs Microeconomiques du Deficit de Financement des PME au Cameroun By Christian Lambert Nguena; Roger Tsafack Nanfosso
  11. Rewarding Judicial Independance: Evidence from the Italian Constitutional court By Nadia FIORINO; Nicolas GAVOILLE; Fabio PADOVANO

  1. By: Catalina M. Torres (Universitat de les Illes Balears); Sergio Colombo (Instituto de Investigación y Formación Agraria y Pesquera (IFAPA)); Nick Hanley (University of St. Andrews)
    Abstract: Gains from the incorporation of monetary values for changes in environmental goods and services within cost-benefit analysis depend on how well researchers can estimate these values. One key problem in both stated and revealed preference approaches is how best to model preference heterogeneity. Researchers have implemented several approaches to represent this heterogeneity, and have shown that the choice of approach can have an effect on welfare estimates. However, the question as to the degree of error in welfare measurement from an inappropriate choice of approach has not been addressed. We use Monte Carlo analysis to investigate this issue in the context of choice modelling of coastal water quality changes, when the researcher chooses between a random parameters and latent class model for representing heterogeneity. This allows us to quantify the errors that emerge from using the wrong model in estimating the benefits of water quality improvements. Our overall conclusion is smaller welfare errors are likely to come from use of a latent class model.
    Keywords: choice experiments; cost-benefit analysis; Monte Carlo analysis; non-market goods; preference heterogeneity; welfare measurement
    JEL: C15 C52 Q51
    Date: 2014
  2. By: Bonnet, Céline; de Mouzon, Olivier
    Abstract: The New Empirical Industrial Organization (NEIO) literature allows to analyze competition, market power and welfare implications of public policies. This literature is based on the estimation of consumer substitution patterns, that is on the estimation of demand models. Standard discrete choice models are commonly used and assume that the consumer chooses only one unit of a single alternative. However, panelists are often shoppers making decisions for the entire household. A household is composed of several persons with various tastes. The current NEIO literature then often omits multiple brand choice and quantity choice of a product representing multiple tastes within the household. To tackle this point, we model multiple discrete/continuous choices of households following Bhat (2005a). Moreover, we deal with observed and unobserved household heterogeneity as well as omitted variable problem that occurs in this type of consumer choice model. Using French purchase data on the Soft Drink Market, we show that consumer substitution patterns could be biased if multiple brand and quantity choices are not taken into account. Indeed, our results suggest that own price elasticities could be significantly underestimated.
    Keywords: multiple purchases, discrete-continuous choices, soft drink market, price elasticities,household heterogeneity
    Date: 2014–08
  3. By: Pierre-Alexandre Mahieu (LEMNA, Université de Nantes); Henrik Andersson (LERNA, Toulouse of School of Economics); Olivier Beaumais (LISA, University of Corsica Pasquale Paoli, Corte); Romain Crastes (ESITPA, AGRI’TERR, Rouen); François-Charles Wolff (LEMNA, Université de Nantes)
    Abstract: This paper provides a systematic review based on a large sample of articles published between 2004 and 2013 in economic journals and listed in ISI Web of Science. Results from descriptive statistics and regression models show that choice experiment (CE) is becoming more popular than contingent valuation (CV) in terms of number of publications and citations. Also, journals related to health economics and agricultural economics are more CE oriented than journals related to environmental economics. Finally, divergences across economic journals are found when comparing recent CE articles in terms of questionnaire design, econometric procedure, administration of questionnaire and type of participants. In particular, it is more standard to allow for unobserved taste heterogeneity in environmental journals than in health or agricultural journals.
    Keywords: Contingent valuation, Choice Experiment, Systematic Review, Environment, Health.
    JEL: Q18 Q51 I10
    Date: 2014–10
  4. By: KESSELS, Roselinde; VAN HERCK, Pieter; DANCET, Eline; ANNEMANS, Lieven; SERMEUS, Walter
    Abstract: Background: Many developed countries are reforming healthcare payment systems in order to limit costs and improve clinical outcomes. Knowledge on how different groups of professional stakeholders trade off the merits and downsides of healthcare payment systems is limited. Methods: Using a discrete choice experiment we asked a sample of physicians, policy makers, healthcare executives and researchers from Canada, Europe, Oceania, and the United States to choose between profiles of hypothetical outcomes on eleven healthcare performance objectives which may arise from a healthcare payment system reform. We used a Bayesian D-optimal design with partial profiles, which enables studying a large number of attributes, i.e. the eleven performance objectives, in the experiment. Results: Our findings suggest that (a) moving from current payment systems to a value-based system is supported by physicians, despite an income trade-off, if effectiveness and long term cost containment improve. (b) Physicians would gain in terms of overall objective fulfillment in Eastern Europe and the US, but not in Canada, Oceania and Western Europe. Finally, (c) such payment reform more closely aligns the overall fulfillment of objectives between stakeholders such as physicians versus healthcare executives. Conclusions: Although the findings should be interpreted with caution due to the potential selection effects of participants, it seems that the value driven nature of newly proposed and/or introduced care payment reforms is more closely aligned with what stakeholders choose in some health systems, but not in others. Future studies, including the use of random samples, should examine the contextual factors that explain such differences in values and buy-in.
    Keywords: Healthcare payment systems, Healthcare performance objectives, Physician incentive structures, Health policy reform, Discrete choice experiment
    JEL: C90 C99 E61 I11 I18 O57
    Date: 2014–10
  5. By: Michela Faccioli (Universitat de les Illes Balears); Antoni Riera Font (Universitat de les Illes Balears); Catalina M. Torres (Universitat de les Illes Balears)
    Abstract: Climate change will further exacerbate wetland deterioration, especially in the Mediterranean region. On the one side, it will accelerate the decline in the populations and species of plants and animals, this resulting in an impoverishment of biological abundance. On the other one, it will also promote biotic homogenization, resulting in a loss of species’ diversity. In this context, different climate change adaptation policies can be designed: those oriented to recovering species’ abundance and those aimed at restoring species’ diversity. Based on the awareness that knowledge about visitors’ preferences is crucial to better inform policy makers and secure wetlands’ public use and conservation, this paper assesses the recreational benefits of different adaptation options through a choice experiment study carried out in S’Albufera wetland (Mallorca). Results show that visitors display positive preferences for an increase in both species’ abundance and diversity, although they assign a higher value to the latter, thus suggesting a higher social acceptability of policies pursuing wetlands’ differentiation. This finding acquires special relevance not only for adaptation management in wetlands but also for tourism planning, as most visitors to S’Albufera are tourists. Thus, given the growing competition to attract visitors and the increasing demand for high environmental quality and unique experiences, promoting wetlands’ differentiation could be a good strategy to gain competitive advantage over other wetland areas and tourism destinations.
    Keywords: climate change, wetland adaptation, species’ diversity, species’ abundance, recreational benefits, choice experiment.
    JEL: D6 Q51 Q54 Q57
    Date: 2014
  6. By: Scott, Paul
    Abstract: I develop a new framework for analyzing land use change with dynamically optimizing landowners. My empirical approach allows for unobservable heterogeneity and avoids the burden of explicitly modeling the evolution of market-level state variables like input and output prices. Using a rich new data set on land use in the United States, I estimate a relatively large long-run cropland-price elasticity of 0.3. Compared to static estimates using the same data, my dynamic estimates suggest that biofuels production leads to dramatically more land use change and substantially smaller price increases in the long run.
    Keywords: agricultural supply estimation, dynamic discrete choice, land use change, biofuels policy
    Date: 2014–05
  7. By: Sylvia Kaufmann (Study Center Gerzensee)
    Abstract: Two Bayesian sampling schemes are outlined to estimate a K-state Markov switching model with time-varying transition probabilities. Data augmentation for the multinomial logit model of the transition probabilities is alternatively based on a random utility and a difference in random utility extension. We propose a definition to determine a relevant threshold level of the covariate determining the transition distribution, at which the transition distributions are balanced across states. Identification issues are addressed with random permutation sampling. In terms of efficiency, the extension to the difference in random utility specification in combination with random permutation sampling performs best. We apply the method to estimate a regime dependent two-pillar Phillips curve for the euro area, in which lagged credit growth determines the transition distribution of the states.
    Date: 2014–02
  8. By: Fabio A. Miessi Sanches; Daniel Silva Junior, Sorawoot Srisuma
    Abstract: The estimation of dynamic games is known to be a numerically challenging task. In this paper we propose an alternative class of asymptotic least squares estimators to Pesendorfer and Schmidt-Dengler’s (2008), which includes several well known estimators in the literature as special cases. Our estimator can be substantially easier to compute. In the leading case with linear payoffs specification our estimator has a familiar OLS/GLS closed-form that does not require any optimization. When payoffs have partially linear form, we propose a sequential estimator where the parameters in the nonlinear term can be estimated independently of the linear components, the latter can then be obtained in closed-form. We show the class of estimators we propose and Pesendorfer and Schmidt-Dengler’s are in fact asymptotically equivalent. Hence there is no theoretical cost in reducing the computational burden. Our estimator appears to perform well in a simple Monte Carlo experiment.
    Keywords: Closed-from Estimation; Dynamic Discrete Choice; Markovian Games
    JEL: C14 C25 C61
    Date: 2014–10–16
  9. By: Rodrigo Ceni (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: This paper analyzes how changes in the social security scheme affect the participation path of workers between the formal and the informal sectors. The choice between the formal and informal sectors is completely voluntary. In this framework, individuals, depending on the retirement program and their endowment of human capital, construct their decision paths in the labor market. I use Argentinean panel data from the period 1995-2011 to estimate a structural model, and this is used to evaluate changes in the workers' behavior when the pension scheme changes. Among the main results, if the parameters are fixed as in the PAYG, there is a slight reduction in the years of the formality and the percentage of workers who achieve a full pension. Moreover, the increase of the requirement to achieve a full pension to 35 years in the formality, increases the percentage of workers in formality over 45 and the number of the years working formally but it decreases the achievement of a pension at all educational levels. The decrease of that requirement has an effect on the reduction of the years in formality even for those who are not affected directly, the high part of the distribution of the high educated. Finally, if the minimum age to achieve a pension is now 67 instead of 65, there is an important increment in the formality and the full pension achievement especially for the low educated workers.
    Keywords: informality, discrete choice, pension schemes, Argentina
    JEL: E26 J24 J26 O17
    Date: 2014–10
  10. By: Christian Lambert Nguena (Association of African Young Economists); Roger Tsafack Nanfosso (Economic Policy Management Program)
    Abstract: La présente étude a pour but d’effectuer une évaluation économétrique des facteurs microéconomiques responsables du problème de financement externe des PME au Cameroun. A l’aide d’un modèle logit multinomial l’on a estimé la variable «Principale source de financement» sur la base des données d’enquête auprès des acteurs du financement portant sur un échantillon de 413 PME du Cameroun. Les résultats montrent que le déficit de financement externe est expliqué par l’absence d’information comptable, le statut juridique Société à Responsabilité Limité (SARL) et Société Anonyme (SA), l’appartenance au secteur industriel, le faible effectif d’employé, le taux d’intérêt élevé et les demandes de crédit à long terme. Ces deux dernières causes étant renforcées par la toute dernière crise financière. Ces résultats conduisent à interpeller Les différents acteurs sur les décisions à prendre en fonction de leur niveau de responsabilité dans ces éléments de frein au financement des PME.
    Keywords: PME, Etablissement financier, Financement externe, Deficit de financement, Econometrie des variables qualitatives
    Date: 2013–06
  11. By: Nadia FIORINO (Dipartimento di Sistemi e Istituzioni per l’Economia, Università degli Studi dell’Aquila, Italy); Nicolas GAVOILLE (CREM-CNRS and Condorcet Center, University of Rennes 1, France); Fabio PADOVANO (CREM-CNRS and Condorcet Center, University of Rennes 1, France, Department of Political Sciences, University Roma Tre, Italy)
    Abstract: We use data about the Italian Constitutional Court (1956-2005) to verify an implication of the “revisionist” explanations of judicial independence with respect to judicial appointments, namely that elected politicians reward more independent justices with appointments after the Court tenure. The empirical strategy is two-step. First, we estimate a logit fixed-effect model to evaluate the personal degree of independence for each Italian justice reporter. This “judge-effect” is based on the proneness of a judge to declare the constitutional illegitimacy of a law controlling for the environmental conditional phenomena. Second, we verify to what extent this degree of independence affects the probability of obtaining a politically controlled occupation after the end of the mandate at the Court. Our results, obtained by a variety of estimators to check their robustness, strongly support the revisionist view.
    Keywords: Judicial independence, revisionist view, post Court political appointments
    JEL: D72 H1
    Date: 2014–06

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