nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2014‒12‒24
five papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Within- and between- sample tests of preference stability and willingness to pay for forest management By Mikolaj Czajkowski; Anna Barczak; Wiktor Budzinski; Marek Giergiczny; Nick Hanley
  2. Enrollment and degree completion in higher education without admission standards By Declercq, Koen; Verboven, Frank
  3. Substitution between Fixed-line and Mobile Access: the Role of Complementarities By Grzybowski, Lukasz; Verboven, Frank
  4. Measuring the value of transport time for inter-regional trade By Se-il Mun; Yoko Konishi; Yoshihiko Nishiyama; Ji-eun Sung
  5. The Motives for the FDI Location Choice in the `Old' and `New' Europe By Ilona Elzbieta Serwicka; Jonathan Jones; Colin Wren

  1. By: Mikolaj Czajkowski (University of Warsaw, Faculty of Economic Sciences, Warsaw Ecological Economics Center, Poland); Anna Barczak (University of Warsaw, Faculty of Economic Sciences, Warsaw Ecological Economics Center, Poland); Wiktor Budzinski (University of Warsaw, Faculty of Economic Sciences, Warsaw Ecological Economics Center, Poland); Marek Giergiczny (University of Warsaw, Faculty of Economic Sciences, Warsaw Ecological Economics Center, Poland); Nick Hanley (School of Geography and Sustainable Development, University of St. Andrews)
    Abstract: The assumption of the stability of preferences is a fundamental one in the theory of the consumer. Many papers within the stated preferences literature have tested this assumption, and have found mixed results. Individuals may become more sure of their preferences as they repeat a valuation task or purchase decision; they may also learn more about prices and quantities of substitutes or complements over time, or about other relevant characteristics of both the good being valued and alternatives in their choice sets. In this paper, we test for the stability of preferences and willingness to pay for attributes of forest management both within and between samples. The within-sample test compares a set of responses from individuals over the sequence of a survey; the between-sample test compares responses from the same people over a period of 6 months. We find that respondents’ preferences differ more within a sample (comparing their first 12 with their second 12 choices) than across samples. This may imply that preference learning and/or fatigue effects within choice experiments are more important than changes in preferences over time in this data.
    Keywords: preference stability, test-retest, discrete choice experiments, contingent valuation, stated preferences, forestry
    JEL: D01 H4 Q23 Q51
    Date: 2014–09
  2. By: Declercq, Koen; Verboven, Frank
    Abstract: Many countries organize their higher education system with limited or no ex ante admission standards. They instead rely more heavily on an ex post selection mechanism, based on the students' performance during higher education. We analyze how a system with ex post selection affects initial enrollment and final degree completion, using a rich dataset for Belgium (region of Flanders). We develop a dynamic discrete choice model of college/university and major choice, where the outcome of the enrollment decision is uncertain. Upon observing past performance, students may decide to continue, reorient to another major, or drop out. We find that ex post student selection is very strong: less than half of the students successfully complete their course work in the first year. Unsuccessful students mainly switch from university to college majors, or from college majors to drop-out. We use the estimates of our model to evaluate the effects of alternative, ex ante admission policies. We find that a suitably designed ex ante screening system (with moderate admission thresholds) can considerably increase degree completion in higher education. A discriminatory screening system for universities only, can raise total degree completion even more, though it implies a shift from university to college degrees.
    Keywords: admission policies; dynamic discrete choice; higher education
    JEL: I20
    Date: 2014–06
  3. By: Grzybowski, Lukasz; Verboven, Frank
    Abstract: We study substitution from fixed-line to mobile voice access, and the role of various complementarities that may influence this process.We use rich survey data on 160,363 households from 27 EU countries during 2005-2012. We estimate a discrete choice model where households may choose one or both technologies, possibly in combination with internet access. We obtain the following main findings. First, there is significant fixed-to mobile substitution, especially in recent years: without mobile telephony, fixed-line penetration would have been 14% higher in 2012. But there is substantial heterogeneity across households and EU regions, with a stronger substitution in Central and Eastern European countries. Second, the decline in fixed telephony has been slowed down because of a significant complementarity between fixed-line and mobile connections offered by the fixed-line incumbent operator. This gives the incumbent a possibility to maintain to some extent its position in the fixed-line market, and to leverage it into the mobile market. Third, the decline in fixed telephony has been slowed down because of the complementarity with broadband internet: the introduction of DSL avoided an additional decline in fixed-line penetration of almost 9% in 2012. The emergence of fixed broadband has thus been the main source through which incumbents maintain their strong position in the fixed-line network.
    Keywords: broadband access; fixed-to-mobile substitution; incumbency advantage
    JEL: L13 L43 L96
    Date: 2014–06
  4. By: Se-il Mun; Yoko Konishi; Yoshihiko Nishiyama; Ji-eun Sung
    Abstract: This paper presents an approach to measuring the values of time cost for freight transportation, and examines its applicability through empirical analysis. We develop the method based on the hedonic approach by explicitly formulating how transport time is determined as market outcome. In the model, the freight charge, the price of transportation services, is determined through interaction in the transport market, where shippers demand and carriers supply transport services. We assume that shippers are willing to pay higher price for faster delivery, which requires additional cost for carriers. Consequently equilibrium freight charge tends to be higher for shorter transport time, such as express delivery fee in postal service. Output of transport service is a bundle of multiple attributes such as quantity, distance, and transport time, thereby freight charge is also a function of multiple attributes. Our model distinguish between the transport technology and firm's effort for reducing transport time: the former is exogenous for firms, and for the market. This formulation has a merit that the effects of technological change (including infrastructure improvement) are more rigorously evaluated: equilibrium transport time under new technology is determined in the market where transport firms choose the level of effort in response to technological change. We estimate the parameters of freight charge function, using microdata from the 2005 Net Freight Flow Census (NFFC), in which information on freight charge, weight, origin and destination, and transport time for individual shipment are obtained. Based on the estimated freight charge function, we obtain the values of transport time for shippers (VTTS) as implicit price in the hedonic theory. We further present a method to evaluate the welfare effect of time-saving technological change based on the hedonic approach. We obtain the estimates of value of time for various combinations of distance (d) and shipment size (weight, q). The value of time is larger as transport distance is shorter, or as shipment size is smaller. Around the sample mean (d = 200, q = 4), the value is 1,232Yen/hour (for time designated delivery) and 1,966 Yen/hour (without time designation). These values are smaller than those estimated by the willingness to pay method (2,606Yen and 1,972Yen) based on discrete choice model of expressway use. We apply the method to evaluate the benefit of time-reducing technological change (including infrastructure improvement) based on hedonic approach to evaluation of expressway construction. Then we compare the results with those obtained by the existing methods. The results suggest that the benefits calculated by our method tend to be larger than those based on the other methods.
    Keywords: transport time; inter-regional trade; hedonic approach;
    JEL: H43 L91 R41
    Date: 2014–11
  5. By: Ilona Elzbieta Serwicka; Jonathan Jones; Colin Wren
    Abstract: This paper adds to the scarce cross-country evidence on FDI location decisions between the EU-15 Member States and the ten new Members that joined the European Union (EU) in 2004 and 2007 from the Central and East European Countries (CEECs). To capture the discrete nature of the location choice, a conditional logit methodology is used to analyze the determinants of FDI location decisions across these EU-25 countries. The study uses the European Investment Monitor database, which contains information on the location of over 35,000 individual cross-border investment projects that were implemented in the EU between 1997 and 2010. The purpose is to understand the factors an investing firm considers when choosing a location within the EU-25, and to understand the effect of the European Union accession process on the amount and nature of this investment. A distinction is made between market-based and resource-based factors, while macroeconomic, industry and institutional variables are included to control for other country-level factors that affect FDI location. Overall, allowing for heterogeneity in preferences of investors locating in the ‘old' versus the ‘new' EU Member States, the results show that FDI tends to avoid congested locations in the EU-15 by locating in the periphery away from main markets, but this tendency is not evident for the CEECs. Investment in the EU-15 is predominantly knowledge-seeking, as better educated workforce attracts FDI, whereas in the CEECs the efficiency-seeking motive dominates, as greater education attainment and higher labour costs both deter FDI. An analysis by industrial sector indicates that these factors apply to manufacturing FDI, but that a better educated workforce is actually more attractive for service FDI in the CEECs, indicating that the knowledge-seeking motive may be more important for FDI in the CEECs in future. The estimates on the controls are plausible and they indicate that EU membership increased the flow of FDI to the CEECs. The results show that membership changed the importance of the market-based and resource-based motives for FDI location in the CEECs.
    Keywords: foreign direct investment; location choice; European Union; conditional logit;
    JEL: F23 R30 O52
    Date: 2014–11

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