nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2014‒11‒28
eleven papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Using a Randomized Choice Experiment to Test Willingness to Pay for Multiple Differentiated Products By Zaffou, Madiha; Campbell, Benjamin L.; Martin, Jennifer
  2. Spatially-Referenced Choice Experiments: Tests of Individualized Geocoding in Stated Preference Questionnaires By Holland, Benedict M.; Johnston, Robert J.
  3. The determinants of spatial location of creative industries start-ups: Evidence from Portugal using a discrete choice model approach By Sara Cruz; Aurora A.C. Teixeira
  4. "A Discrete/Continuous Choice Model on a Nonconvex Budget Set" By Yuta Kurose; Yasuhiro Omori; Akira Hibiki
  5. Modeling Food Retail Format Choice and Shopping Frequency Decision in Urban Ghana: A Multivariate Ordered Probit Regression Application By Meng, Ting; Florkowski, Wojciech J.; Sarpong, Daniel B.; Chinnan, Manjeet S.; Resurreccion, Anna V. A.
  6. Rural Households’ Access, Willingness to Pay (WTP) and Factors Influencing WTP for Safe Water and Sanitation in Southwest Nigeria By Dare, Alaba Modupe
  7. Short-run fertility effects of parental leave benefits: Evidence from a structural model By Stichnoth, Holger
  8. Can Nutrition and Health Information Increase Demand for Seafood among Parents? Evidence from a Choice Experiment By Bi, Xiang; House, Lisa; Gao, Zhifeng
  9. Assessing the Impact of Fresh Vegetable Growers’ Risk Aversion Levels and Risk Perception on the Probability of Adopting Marketing Contracts: A Bayesian Approach. By Vassalos, Michael; Li, Yingbo
  10. Farmers' willingness to grow oilseeds as biofuel feedstocks for jet fuel production: A latent class approach By Andrango, Graciela; Bergtold, Jason; Shanoyan, Aleksan; Archer, David; Flora, Cornelia
  11. Evaluating the Effectiveness of Flood Mitigation Policies in the U.S. By Fan, Qin; Davlasheridze, Meri

  1. By: Zaffou, Madiha; Campbell, Benjamin L.; Martin, Jennifer
    Abstract: The purpose of this paper is to evaluate the importance of different attributes of three major product categories: fruits, vegetables and ornamental plants, in order to understand the relative effect of these attributes on consumer’s choice. Using an online survey we implemented a choice based conjoint experiment. Respondents were asked to randomly evaluate two of the ten products being tested in the survey. A mixed logit model was used to analyze the data and determine willingness to pay for each product attribute. We further tested for the impact of purchase behavior and any randomization effect. Results for most of the products we analyzed demonstrate that consumers value locally grown products more than national products. Furthermore, results show that consumers tend to pay more money for farm and organic produce, but less for the latter one if consumers do not have prior experience buying organic. We also find a randomization effect that should be accounted for when evaluating multiple products in a survey.
    Keywords: Willingness to Pay, Choice Based Conjoint Analysis, Specialty Crops, Consumer/Household Economics, Demand and Price Analysis, Research Methods/ Statistical Methods, Q13,
    Date: 2014–07
  2. By: Holland, Benedict M.; Johnston, Robert J.
    Abstract: Maps in stated preference surveys rarely identify the location of respondents’ homes. This standard approach is grounded in the assumption that respondents are aware of their exact household locations relative to mapped policy effects, and hence possess sufficient understanding of spatial relationships to support well-informed preference elicitation. The validity this assumption is rarely if ever tested. This paper evaluates this nearly universal practice of generic policy-area mapping in choice experiments. This is compared to a more information-intensive alternative in which individualized maps pinpoint the location of each respondent’s household relative to policy effects. The latter approach requires a unique map to be generated for each respondent. Methods and results are illustrated using an application to riparian land restoration in south coastal Maine. Comparison of the results from these two approaches illustrates the implications of stated preference survey design that provides additional cartographic detail, and suggests the potential limitations of generic policy area maps.
    Keywords: Willingness to Pay, Individualized Survey, Stated Preference, Ecosystem Service, Valuation, Environmental Economics and Policy,
    Date: 2014
  3. By: Sara Cruz (CEF.UP, Faculdade de Economia, Universidade do Porto); Aurora A.C. Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC TEC; OBEGEF)
    Abstract: This paper assesses the location determinants of the newly created firms in the creative sector within the framework of Discrete Choice Models. Estimations using a conditional logit model, which incorporate spatial effects of neighbouring regions in the location choices of firms, yield the following results: i) the concentration of creative and knowledge-based activities, due to agglomeration economies, play an important role in location decisions of new creative establishments; ii) in contrast, the concentration of service-business activities has a negative impact on location choices, which may be due to the fact that creative firms privilege interdependencies with other activity sectors, such as innovation/ knowledge-based activities; iii) creative firms tend to favour a diversified industrial tissue and related variety, in order to enjoy from inter-sectorial synergies; iv) higher education at a regional level has a highly significant, positive effect on location decisions, while lower educational levels of human capital negatively affect those decisions, explained by the specific requirements that creative firms usually have of a highly skilled labour force; v) tolerant/ open environments attract creative activities; vi) creative firms tend to favour municipalities where the stock of knowledge and conditions for innovative activity are higher. Location decisions of creative firms also vary according to the creative sector they belong to and to their own characteristics, firm’s educational level or technology-intensity. Finally, municipality attributes are more important in terms of firms’ location decisions than the characteristics of nearby regions.
    Keywords: Spatial economics; industrial location; econometric models; creative industries.
    JEL: C01 R12 R30
    Date: 2014–10
  4. By: Yuta Kurose (School of Economics, Kwansei Gakuin University); Yasuhiro Omori (Faculty of Economics, The University of Tokyo); Akira Hibiki (Faculty of Economics, Sophia University)
    Abstract: Decreasing block rate pricing is a nonlinear price system often used for public utility services. Residential gas services in Japan and the United Kingdom are provided under this price schedule. The discrete/continuous choice approach is used to analyze the demand under decreasing block rate pricing. However, the nonlinearity problem, which has not been examined in previous studies, arises because a consumer’s budget set (a set of affordable consumption amounts) is nonconvex and, hence, the resulting model includes highly nonlinear functions. To address this problem, we propose a feasible, efficient method of demand estimation on the nonconvex budget. The advantages of our method are as follows: (i) the construction of an Markov chain Monte Carlo algorithm with an efficient blanket based on the Hermite-Hadamard integral inequality and the power-mean inequality, (ii) the explicit consideration of the (highly nonlinear) separability condition, which often makes numerical likelihood maximization difficult, and (iii) the introduction of normal disturbance into the discrete/continuous choice model on the nonconvex budget set. The proposed method is applied to estimate the Japanese residential gas demand function and evaluate the effect of price schedule changes as a policy experiment.
    Date: 2014–09
  5. By: Meng, Ting; Florkowski, Wojciech J.; Sarpong, Daniel B.; Chinnan, Manjeet S.; Resurreccion, Anna V. A.
    Keywords: joint distribution, conditional distribution, cross equation correlation, Agricultural and Food Policy, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety,
    Date: 2014–05
  6. By: Dare, Alaba Modupe
    Abstract: Access to safe water and sanitation is one of the core development indicators recently gaining pre-eminence in Nigeria. This study examined rural households’ access, willingness to pay (WTP) and factors influencing WTP for safe water and sanitation. The study was conducted in Ogun State, Nigeria. A cross sectional survey which involved the use of questionnaire was used. A dichotomous choice (DC) with follow-up was used as elicitation method. A multi-stage random sampling technique was used to select 160 rural households. Descriptive statistics and Logit regression model was used for data estimation. Results revealed that 24.4% had access to safe water; 21.3% and 6.2% had access to improved toilet and refuse dumping sites. Most respondents showed WTP for these improved services. Sex (p<0.01), occupation (p<0.01) and income (p<0.1) significantly influenced rural households’ likelihood WTP for these facilities. Inference from this study showed that rural dwellers’ access to safe water and sanitation is highly deplorable. Governments and stakeholders should encourage and support to rural people by providing these facilities given their willingness to pay for it.
    Keywords: Safe water, sanitation, Willingness to pay (WTP), Community/Rural/Urban Development, Consumer/Household Economics,
    Date: 2014–07
  7. By: Stichnoth, Holger
    Abstract: Based on a structural model of fertility and female labour force supply with unobserved heterogeneity and state dependence, we evaluate the 2007 reform of parental leave benefits in Germany, which replaced a flat, means-tested benefit by a generous earnings-related transfer. The model predicts a short-term fertility effect of about 4%, which is consistent with recent quasi-experimental evidence. The fertility effect is strongest for first births and increases with income. We use the model for a number of counterfactual policy experiments in which we vary the generosity of parental leave benefits.
    Keywords: Fertility,female labour supply,family policy,parental leave,latent class models,state dependence
    JEL: C25 C53 J13 J22
    Date: 2014
  8. By: Bi, Xiang; House, Lisa; Gao, Zhifeng
    Abstract: While federal rules require specific meat and poultry products to carry nutrition information labeling, these rules do not extend to fresh seafood products. This paper focuses on the extent to which the provision of nutrition information could impact consumer demand for seafood, with a special focus on parents with children, who influence the food preferences of future generations. Using a choice experiment, we found that providing nutrition information similar to the nutrition facts panel increased the marginal willingness to pay (MWTP) for all types of seafood studied; whereas information on the health benefit of Omega-3 fatty acids increased the MWTP for some types of seafood. This finding can inform the industry and policy-makers on the potential impact of introducing nutrition labels for raw seafood.
    Keywords: seafood, nutrition information, health information, Omega-3 fatty acids, choice experiment, Food Consumption/Nutrition/Food Safety, Marketing, Q13, Q18, M31, C35, C90,
    Date: 2014–05
  9. By: Vassalos, Michael; Li, Yingbo
    Abstract: One of the most frequently used arguments to explain the increased use of contractual arrangements is that risk drives the choice of contracts. However, there is limited empirical support for this argument. A Bayesian ordered probit formulation is utilized in this study to examine the impact of fresh vegetable producers’ personal characteristics on the probability of adopting marketing contracts. Among the characteristics examined are: risk aversion levels, risk perception, age, education, income, location. The findings indicate that age, farm size and the potential to expand the operation are parameters that affect the choice of contracts. On the other hand, the results do not support the risk shifting hypothesis.
    Keywords: Marketing Contracts, Bayesian Ordered Probit, Risk, Agribusiness, Marketing, Q12, Q13,
    Date: 2014
  10. By: Andrango, Graciela; Bergtold, Jason; Shanoyan, Aleksan; Archer, David; Flora, Cornelia
    Keywords: Latent class model, biofuel, oilseeds, Resource /Energy Economics and Policy,
    Date: 2014
  11. By: Fan, Qin; Davlasheridze, Meri
    Abstract: We employ a two-stage random utility model (RUM) to estimate people’ marginal willingness to pay (WTP) for enhancing community-level floodplain management activities reflected in the National flood insurance program (NFIP)’s Community Rating System (CRS) program. CRS is a voluntary program, which provides the participating communities with discounts on flood insurance premium in exchange for strengthened flood protection activities. Results show that people with different demographics react differently to flood risk and generally value flood protection activities. We find that among the CRS program activities, people place the highest value on activities concerning repetitive flood loss reduction, with the second highest being public information disclosure about flood risk. In addition, results suggest that people significantly value structural mitigation projects such as flood- and debris- control dams. Importantly, our results suggest that water body as an amenity measure is perceived positively in people’s location choices, nonetheless flood risk information disclosure diminishes the amenity value.
    Keywords: Flood Insurance, Community Rating System, Tiebout Sorting, Locational Equilibrium, Environmental Economics and Policy, Risk and Uncertainty, Q51, Q54 and Q58,
    Date: 2014

This nep-dcm issue is ©2014 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.