nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2014‒12‒13
eighteen papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Heterogeneous Consumer Preferences for Nanotechnology and Genetic-Modification Technology in Food Products By Yue, Chengyan; Zhao, Shuoli; Kuzma, Jennifer
  2. Addressing elimination and selection by aspects decision rules in discrete choice experiments: does it matter? By Erdem, Seda; Campbell, Danny; Thompson, Carl
  4. Crop Choice and Rotational Effects: A Dynamic Model of Land Use in Iowa in Recent Years By Ji, Yongjie; Rabotyagov, Sergey; Kling, Catherine L.
  5. Which demand systems can be generated by discrete choice? By Mark Armstrong; John Vickers
  6. Estimation of Dynamic Discrete Choice Models by Maximum Likelihood and the Simulated Method of Moments By Phillipp Eisenhauer; James J. Heckman; Stefano Mosso
  7. A Multivariate Model for Multinomial Choices By Bel, K.; Paap, R.
  8. Preferences for Attributes of Conservation Agriculture in Eastern Uganda By Vaiknoras, Kate; Norton, George; Alwang, Jeffrey; Taylor, Daniel
  9. Accounting for unobserved heterogeneity in micro-econometric agricultural production choice models: a random parameter approach By Carpentier, Alain; Féménia, Fabienne; Koutchadé, Philippe
  10. Chinese consumers’ preferences and willingness to pay for traceable food attributes: The case of pork By Wang, Shuxian; Wu, Linhai; Zhu, Dian; Wang, Hongsha; Xu, Lingling
  11. Crop Choice, Rotational Effects and Water Quality Consequence in Up-Mississippi River Basin: Connecting SWAT Model with Dynamic Land Use Model By Ji, Yongjie; Rabotyagov, Sergey; Kling, Catherine L.
  12. The Effects of Country of Origin Image and Patriotism on British Consumers' Preference for Domestic and Imported Beef By Meas, Thong; Hu, Wuyang; Grebitus, Carola; Colson, Gregory J.
  13. The Impact of Location and Proximity on Consumers’ Willingness to Pay for Renewable and Alternative Electricity: The Case of West Virginia By Nkansah, Kofi; Collins, Alan
  14. Consumer attitudes toward the use of gene technology in functional breakfast grain product: Comparison between college students from US and China By Wang, Nanying; Houston, Jack; Colson, Gregory J.; Liu, Zimin
  15. The Sustainable Choice: How Gendered Difference in the Importance of Ecological Benefits Affect Production Decisions of Smallholder Cacao Producing Households in Ecuador By Useche, Pilar; Blare, Trent
  16. Logit price dynamics By Costain, James; Nakov, Anton
  17. Position bias in best-worst scaling surveys: a case study on trust in institutions By Campbell, Danny; Erdem, Seda
  18. Producer Perceptions of Risk and Time By Hedge, Kendra M.; Yeager, Elizabeth A.

  1. By: Yue, Chengyan; Zhao, Shuoli; Kuzma, Jennifer
    Abstract: This study investigates heterogeneous consumer preferences for nano-food and genetic-modified (GM) food and the associated benefits using the results of choice experiments with 1117 U.S. consumers. We employ a mixed logit model and a latent class logit model to capture the heterogeneity in consumer preferences by identifying consumer segments. Our results show that nano-food evokes less negative reactions compared with GM food. We identify four consumer groups: “Price Oriented/Technology Adopters,” “Technology Averse,” “Benefit Oriented/Technology Accepters,” and “New Technology Rejecters.” Each consumer group has distinctive demographic backgrounds, which generates deeper insights in the diversified public acceptance for nano-food and GM food. Our results have important policy implications in the adoption of new food technologies.
    Keywords: Nanotechnology, Genetic-modification, Choice Experiment, Mixed Logit Model, Latent Class Models, Consumer/Household Economics, Institutional and Behavioral Economics, Marketing, Q13, D12, Q18,
    Date: 2014
  2. By: Erdem, Seda; Campbell, Danny; Thompson, Carl
    Abstract: Priorities for public health innovations are typically not considered equally by all members of the public. When faced with a choice between various innovation options, it is, therefore, possible that some respondents eliminate and/or select innovations based on certain characteristics. This paper proposes a flexible method for exploring and accommodating situations where respondents exhibit such behaviours, whilst addressing preference heterogeneity. We present an empirical case study on the public’s preferences for health service innovations. We show that allowing for elimination-by-aspects and/or selection-by-aspects behavioural rules leads to substantial improvements in model fit and, importantly, has implications for willingness to pay estimates and scenario analysis.
    Keywords: Discrete Choice Experiments, elimination by aspects, selection by aspects, latent class logit model, health service innovations., Consumer/Household Economics, Health Economics and Policy, Institutional and Behavioral Economics, Public Economics, Research Methods/ Statistical Methods,
    Date: 2014
  3. By: Shen, Meng; Gao, Zhifeng; Schroeder, Ted
    Abstract: It is increasingly recognized that respondents use simple heuristics such as attribute non-attendance to make decisions in the discrete choice experiments. This paper use the latent class model to investigate different choice strategies and explore robust welfare estimates under varying attribute information load. We find that respondents are more likely to rely on simple heuristics to make choices when information load increases. Reinforcing previous findings, we also observe that willingness-to-pay estimates decrease, with and without accounting for attribute non-attendance.
    Keywords: Discrete Choice experiments, Attribute Non-Attendance, Latent Class Model, Simple Heuristics, Willingness-to-pay, Agribusiness, Food Consumption/Nutrition/Food Safety, Institutional and Behavioral Economics, Marketing,
    Date: 2014
  4. By: Ji, Yongjie; Rabotyagov, Sergey; Kling, Catherine L.
    Abstract: A dynamic land use model, more specifically a dynamic discrete choice model, is developed in this paper to model Iowa farmers' crop choice decisions in recent years based on the newly released field-scale cropland data layers by National Agricultural Statistics Service. We explicitly consider the dynamic effects naturally arising in the corn/soybean crop system and estimate the model using the conditional choice probability method. Compared to static models, dynamic land use models perform relatively better. The dynamic models produce significantly different arc elasticity than the static model in a policy scenario when the corn price increases by 10 percent.
    Keywords: Dynamic Discrete Choice Model, Land Use Change, Rotation Effects, Land Economics/Use, Research Methods/ Statistical Methods, Q15,
    Date: 2014
  5. By: Mark Armstrong; John Vickers
    Abstract: We provide a simple necessary and sufficient condition for when a multiproduct demand system can be generated from a discrete choice model with unit demands.
    Keywords: Discrete choice, unit demand, multiproduct demand functions
    JEL: D01 D11
    Date: 2014–10–29
  6. By: Phillipp Eisenhauer; James J. Heckman; Stefano Mosso
    Abstract: We compare the performance of maximum likelihood (ML) and simulated method of moments (SMM) estimation for dynamic discrete choice models. We construct and estimate a simplified dynamic structural model of education that captures some basic features of educational choices in the United States in the 1980s and early 1990s. We use estimates from our model to simulate a synthetic dataset and assess the ability of ML and SMM to recover the model parameters on this sample. We investigate the performance of alternative tuning parameters for SMM.
    JEL: C13 C15 C35 I21
    Date: 2014–10
  7. By: Bel, K.; Paap, R.
    Abstract: __Abstract__ Multinomial choices of individuals are likely to be correlated. Nonetheless, econometric models for this phenomenon are scarce. A problem of multivariate multinomial choice models is that the number of potential outcomes can become very large which makes parameter interpretation and inference difficult. We propose a novel Multivariate Multinomial Logit specification, where (i) the number of parameters stays limited; (ii) there is a clear interpretation of the parameters in terms of odds ratios; (iii) zero restrictions on parameters result in independence between the multinomial choices and; (iv) parameter inference is feasible using a composite likelihood approach even if the multivariate dimension is large. Finally, these nice properties are also valid in a fixed-effects panel version of the model.
    Keywords: Discrete Choices, Multivariate analysis, Multinomial Logit, Composite Likelihood
    Date: 2014–10–13
  8. By: Vaiknoras, Kate; Norton, George; Alwang, Jeffrey; Taylor, Daniel
    Abstract: Conservation agriculture has many potential benefits for small farmers. This study seeks to estimate the value that farmers in eastern Uganda place on some these benefits. Data from a choice experiment study are analyzed with a mixed logit model to determine farmers’ willingness to pay for increases in maize yield, reductions in erosion, and reductions in land preparation labor requirements. It finds that farmers have a statistically significant willingness to pay for increases in yield and reductions in erosion, but not for reductions in land preparation labor.
    Keywords: Crop Production/Industries, Farm Management,
    Date: 2014–05
  9. By: Carpentier, Alain; Féménia, Fabienne; Koutchadé, Philippe
    Abstract: This poster presents a random parameter multicrop production choice models and its parameter estimates with a panel data set of 111 French crop producers from 2004 to 2007
    Keywords: random parameter model, multicrop production choice model, panel data, Crop Production/Industries, Farm Management, Land Economics/Use, Production Economics,
    Date: 2014–05–28
  10. By: Wang, Shuxian; Wu, Linhai; Zhu, Dian; Wang, Hongsha; Xu, Lingling
    Abstract: China is a large consumer and producer of pork. However, pork is a common food that frequently suffers from safety problems in China. Thus, the safety of pork is of important strategic significance to China's food safety. The food traceability system is considered a major tool for the fundamental prevention of food safety risks. In this study, four attributes, i.e., traceability information, quality certification, appearance, and price, were set for traceable pork on the basis of previous studies. Levels were set for the attribute traceability information based on the major processes of safety risk in the Chinese pork supply chain. For the level setting of quality certification, domestic and international third-party certification was included in addition to government certification. Levels of price were set by appropriately increasing the average price of pork in cities surveyed in September 2013 according to the premiums that consumers were willing to pay for particular attribute levels in a random nth price auction. Based on the above experimental design, a survey was conducted in 1,489 consumers in seven pilot cities designated by the Chinese Ministry of Commerce for construction of a meat circulation traceability system. On this basis, consumer preferences and willingness to pay for traceable pork attributes, as well as influencing factors, were investigated using choice experiments. According to the results from both mixed logit and latent class models, quality certification was the most important characteristic, followed by appearance, and traceability information. In addition, “government certification”, “fresh-looking”, and “traceability information covering farming, slaughter, and processing, and circulation and marketing” were the most preferred levels of quality certification, appearance, and traceability information, respectively. Significant heterogeneity was observed in consumer preferences for the attributes of traceable pork. Consumers’ preferences and willingness to pay for traceability information and quality certification were significantly influenced by age, monthly family income, and education level. It is hoped that the findings of this study will provide a useful reference for the Chinese government in improving traceable food consumption policies.
    Keywords: Traceable pork attributes, Consumer preferences, Willingness to pay, Choice experiment, Food Consumption/Nutrition/Food Safety, Marketing,
    Date: 2014–03
  11. By: Ji, Yongjie; Rabotyagov, Sergey; Kling, Catherine L.
    Abstract: In this research, we propose a framework to connect SWAT model with a dynamic discrete choice based land use model. With the recent years of cropland data layers published by NASS, USDA and data complied from other sources, we apply this framework to land use change in Upper-Mississippi River Basin in different scenarios and evaluate water quality consequences associated with induced land use change.
    Keywords: dynamic land use model, SWAT, water quality, climate change, Environmental Economics and Policy, Land Economics/Use, Research Methods/ Statistical Methods, Q15, Q22,
    Date: 2014
  12. By: Meas, Thong; Hu, Wuyang; Grebitus, Carola; Colson, Gregory J.
    Abstract: This article surveys British consumers’ preference for domestic and imported beef identified by country of origin labels (COOLs). Like previous studies related to COOL, we found a strong preference for domestic beef. Furthermore, the factors influencing such preference were examined. Using consumer patriotism and country of origin image perception, we found that stronger preference against imports was linked to higher perceived level of patriotism of the respondents toward their country, while better country of origin image improved the likelihood of the foreign country’s beef being selected.
    Keywords: Country of Origin Label, Country of Origin Image, Consumer Patriotism, Choice experiment, Willingness-to-Pay for Beef, Mixed Logit model, Agribusiness, Agricultural and Food Policy, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, International Relations/Trade, Q13,
    Date: 2014–07–29
  13. By: Nkansah, Kofi; Collins, Alan
    Abstract: In 2015, West Virginia will implement a Renewable and Alternative Energy Portfolio Standards Act. Meeting these standards with either natural gas or wind power will generate different welfare impacts across society. In particular, this study examined how energy source and generation proximity influence consumers’ willingness-to-pay (WTP) for electricity. Using choice modelling, residents within two counties with distinct location characteristics (existing coal power plant or wind farm) were asked to choose between a renewable source (wind farm) and an alternative energy source (natural gas power plant). We also seek to determine how residents’ proximity to a hypothetical electricity generation facility (wind farm or natural gas generation source) influences their WTP for renewable and alternative electricity. Results showed that the sampled population in both counties were willing to pay a much higher positive premium to site a natural gas-fired power plant at a distances far from their residence compared to siting wind turbines at a similar distance. Compensation was required to site a natural gas-fired power plant at a moderate distance from an individuals’ residence.
    Keywords: Willingness to Pay, Choice Experiment, Renewable energy, Consumer/Household Economics, Demand and Price Analysis, Environmental Economics and Policy, Institutional and Behavioral Economics, Resource /Energy Economics and Policy,
    Date: 2014
  14. By: Wang, Nanying; Houston, Jack; Colson, Gregory J.; Liu, Zimin
    Abstract: Our study provides result using mixed logit model from analyzing of choice experiment survey data to examine college students' attitudes toward genetically modified (GM) breakfast product from U.S. and China. Here we expand on previous research by exploring certain socio-demographic, attitudinal and behavioural variables and concerns from college students from China and US and focus on the specific functional GM staple products. This would be useful in developing and characterizing market segments for food products based on consumers’ information. GM food producers and exporters can use this information to design effective marketing strategies. Results showed that college students in these two countries are willing to pay premium for the Non-GM staple breakfast products.
    Keywords: consumer attitude, Genetic Modification, WTP, college students, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety,
    Date: 2014–07–27
  15. By: Useche, Pilar; Blare, Trent
    Abstract: Our research examines how the changing cultural norms and legal status in Ecuador have impacted women’s empowerment in the agricultural sector and in rural communities. Cacao provides a particularly relevant case because of its economic and ecological importance to Ecuador and the region. The traditional cacao agroforests also provide many ecological services such as habitat for many endangered plants and animals. However, they are not as profitability as the monoculture systems. Because of these economic and ecological concerns, promotion of cacao agroforests has been the focus of development efforts by the Ecuadorian government, nongovernmental organizations, and international donor agencies, many of whom also have goals of empowering Ecuadorian women (Suarez 2013). Thus, women’s involvement in cacao production would be an important indicator of women’s status in rural Ecuador. To determine the value that men on women place on these nonmarket benefits and ability of women to influence household production decisions, we conducted 350 household interviews throughout coastal Ecuador from February through July, 2013. We implemented a choice experiment separately with the principle male and female member of the household. The choice experiment consisted of the household member choosing between pictures of two parcels to determine how much more profit the participant would need to receive in order to prefer the monoculture system over the agroforestry system. By employing a Random Effects Logit regression, we were able calculate men and women’s average willingness to pay for the attributes of the cacao agroforests (Birol et al. 2006). We found that both genders place a higher value on the agroforests than monoculture corps; however, women place a higher value on these benefits than men do.
    Keywords: gender, cacao, Ecuador, willingness to pay, choice experiment, agroforestry, Environmental Economics and Policy, Food Security and Poverty, International Development,
    Date: 2014
  16. By: Costain, James; Nakov, Anton
    Abstract: We model retail price stickiness as the result of errors due to costly decision-making. Under our assumed cost function for the precision of choice, the timing of price adjustments and the prices firms set are both logit random variables. Errors in the prices firms set help explain micro “puzzles” relating to the sizes of price changes, the behavior of adjustment hazards, and the variability of prices and costs. Errors in adjustment timing increase the real effects of monetary shocks, by reducing the “selection effect”. Allowing for both types of errors also helps explain how trend inflation affects price adjustment. JEL Classification: E31, D81, C73
    Keywords: information-constrained pricing, logit equilibrium, near rationality, nominal rigidity, state-dependent pricing
    Date: 2014–07
  17. By: Campbell, Danny; Erdem, Seda
    Abstract: This paper investigates the effect of physical position on ‘best’ and ‘worst’ choices in the bestworst scaling technique. Although the best-worst scaling technique has been used widely in many fields, the phenomenon of consumers’ adoption of processing strategies while making choices has been largely overlooked. We examine this issue in the context of consumers’ perception of trust in institutions to provide information about a new food technology, namely nanotechnology, and its use in food processing. Our results show that around half of the consumers used position as a schematic cue when making choices. We find the position bias is particularly strong when consumers chose their most trustworthy institution compared to their least trustworthy institution. In light of our findings, we recommend researchers in the field to be aware of the possibility of position bias when designing best-worst scaling surveys. We also encourage researchers who have already collected best-worst data to investigate whether their data shows such heuristics.
    Keywords: best-worst scaling, position bias, consumer trust, multinomial logit model, latent class logit model, Consumer/Household Economics, Research Methods/ Statistical Methods, C25, D12, Q18,
    Date: 2014
  18. By: Hedge, Kendra M.; Yeager, Elizabeth A.
    Abstract: Agribusinesses rely on producers choosing their products and services for the success of their business. Agribusinesses can use information regarding how producers rate the importance of certain areas of risk and what takes most of the producers’ time to offer specific services to different segments of producers to better meet their needs. An ordered logit model and a multinomial logit model are used to determine factors significant to producers’ use of time and importance of various areas of risk. The results provide insights to agribusinesses that can help them identify producer segments.
    Keywords: risk, time management, multinomial logit, ordered logit, Agribusiness, Farm Management,
    Date: 2014–05–28

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.