nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2015‒01‒03
eight 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 Cati Torres; Sergio Colombo; Nick Hanley
  2. Social norms, morals and self-interest as determinants of pro-environment behaviour By Mikolaj Czajkowski; Nick Hanley; Karine Nyborg
  3. Modelling nonlinearities and reference-dependence in general practitioners’ income preferences By Holte, J.H.;; Sivey, P.;; Abelsen, B.;; Olsen, J.A.;
  4. Labor Supply as a Choice among Latent Jobs: Unobserved Heterogeneity and Identification By Dagsvik, John K.; Jia, Zhiyang
  5. An Empirical Model of Expressway Drivers Behaviors on Stopover at sa/pa involving the Location Choice By KAZUO NISHII; KUNIAKI SASAKI; JUN TANABE; SHUN-ICHI YOSHIHARA
  6. Default probabilities, CDS premiums and downgrades : A probit-MIDAS analysis By Freitag L.
  7. The impact of perceptions in averting-decision models: An application of the special regressor method to drinking water choices By Bontemps, Christophe; Nauges, Céline
  8. Cooperation Determinants in the Atlantic Blue Economy By Pinto, Hugo

  1. By: Cati Torres (Universitat de les Illes Balears, Mallorca, Spain); Sergio Colombo (Instituto de Investigación y Formación Agraria y Pesquera (IFAPA), Junta de Andalucia); Nick Hanley (School of Geography and Sustainable Development, 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: 2014–10
  2. By: Mikolaj Czajkowski (University of Warsaw, Faculty of Economic Sciences, Poland); Nick Hanley (School of Geography and Sustainable Development, University of St. Andrews); Karine Nyborg (University of Oslo, Department of Economics, Norway)
    Abstract: This paper considers the role which selfish, moral and social incentives and pressures play in explaining the extent to which stated choices over pro-environment behaviours vary across individuals. The empirical context is choices over household waste contracts and recycling actions in Poland. A theoretical model is used to show how cost-based motives and the desire for a positive self- and social image combine to determine the utility from alternative choices of recycling behaviour. We then describe a discrete choice experiment designed to empirically investigate the effects such drivers have on stated choices. Using a latent class model, we distinguish three types of individual who are described as duty-orientated recyclers, budget recyclers and homo oeconomicus. These groups vary in their preferences for how frequently waste is collected, and the number of categories into which household waste must be recycled. Our results have implications for the design of future policies aimed at improving participation in recycling schemes.
    JEL: D22 F18 Q41 Q52
    Date: 2014–08
  3. By: Holte, J.H.;; Sivey, P.;; Abelsen, B.;; Olsen, J.A.;
    Abstract: This paper tests for the existence of nonlinearity and reference-dependence in income preferences for general practitioners. Confirming the theory of reference dependent utility, within the context of a discrete-choice experiment, we find that losses loom larger than gains in income for Norwegian GPs, a 10% decrease in income is valued approximately equal to a 30% gain. Our results are validated by comparison with equivalent contingent valuation values for marginal willingness to pay and marginal willingness to accept compensation for changes in job characteristics. Physicians’ income preferences determine the effectiveness of ‘pay for performance’ and other incentive schemes. Our results may explain the relative ineffectiveness of financial incentive schemes that rely on increasing physicians’ incomes.
    Keywords: general practitioners; income; reference-dependence; discrete choice experiment;
    JEL: I11 J44 J31
    Date: 2014–08
  4. By: Dagsvik, John K. (Research Department, Statistics Norway, and the Frisch Centre of Economic Research); Jia, Zhiyang (Statistics Norway)
    Abstract: This paper discusses aspects of a framework for modeling labor supply where the notion of job choice is fundamental. In this framework, workers are assumed to have preferences over latent job opportunities belonging to worker-specific choice sets from which they choose their preferred job. The observed hours of work and wage is interpreted as the job-specific hours and wage of the chosen job. The main contribution of this paper is an analysis of the identification problem of this framework under various conditions, when conventional cross-section micro-data are applied. <p> The modeling framework is applied to analyze labor supply behavior for married/cohabiting couples using Norwegian micro data. Specifically, we estimate two model versions with in the general framework. Based on the empirical results, we discuss further qualitative properties of the model versions. Finally, we apply the preferred model version to conduct a simulation experiment of a counterfactual policy reforms.
    Keywords: Labor supply; non-pecuniary job attributes; latent choice sets; random utility models; identification
    JEL: C51 J22
    Date: 2014–09–15
    Abstract: Drivers on expressway have not only need of high speed and safety but also other various kinds of services for their comfortable traveling. The Japan expressway company (called NEXCO) privatized in 2005 has increasingly attached great importance to improvement of those services. Service and parking areas (SA/PAs) are consequently required to offer not only traditional rest stop services but also additional services, such as refreshments, dining, and souvenir shopping. Previous researches of driver decision-making on stopover at SA/PA and on which SA/PA is chosen have been hardly advanced because of lack of survey data. These data are clearly useful to identify the factors determining SA/PA choice behaviors and also to develop marketing strategies for promoting SA/PA use. This research aims to analyze driverÂfs decision structures on SA/PA choice behaviors and the level of customer satisfaction with SA/PA services. The web-based questionnaire surveys were conducted twice to the drivers who stopped at the studied SA/PAs on the surveyed period. One was done at the section on Chugoku expressway in 2012 and the other was on Sanyo expressway in 2013. Based on the results from our previous study, in which a structural equation model (SEM) was applied to represent the decision structure underlying SA/PA choice behavior using Chugoku expressway data in 2012, a discrete choice behavior model is developed to identify whether a given driver would stop at any of the studied SA/PAs or not and to identify which SA/PA would be chosen. In this modeling, two different types of the nested logit models, in which the upper level is the decision on stopover at SA/PA or not and the lower level is the one on choice of the location, are mainly calibrated using both the data set of Chugoku in 2012 and those of Sanyo in 2013. The goodness of fit of estimated models including statistical significance of estimated parameters are discussed to clarify the differences in determining factors between Chugoku and Sanyo expressways. The results indicate that both two types of nested logit models are significant in common while the goodness of fit for Chugoku models are different from that for Sanyo models. They also indicate that those differences are caused by driverÂfs characteristics such as travel distance and frequency of expressway use, and by SA/PA characteristics such as the contents of services and the CS (customer satisfaction rate) and the location distribution.
    Keywords: Service Area on expressway; driver's choice behavior; nested logic model
    Date: 2014–11
  6. By: Freitag L. (GSBE)
    Abstract: This paper examines the relationship between sovereign credit default swaps CDS and sovereign rating changes of European countries. To this aim, a new estimator is introduced which merges mixed data sampling MIDAS with probit regression. Simulations show that the estimator has good properties in finite sample. Also, I investigate a bootstrap procedure introduced by Ghysels et al. 2007, which should be able to handle significance testing in a MIDAS setting. The bootstrap hasgood size but low power. For the empirical analysis I use sovereign CDS data for 22 EU countries trying to correlate sovereign downgrades with sovereign CDS premiums. Overall the CDS data and the ratings are in most cases significantly positively correlated. Therefore, Credit Rating Agencies CRA and financial markets are generally agreeing on the implied default probability of sovereign nations. Also, CDS prices are expecting downgrades in advance in the majority of investigateddatasets. However, this does not mean that a default probability can be extracted from raw CDS prices. Instead, by using a MIDAS estimator, I significantly reduce the amount of noise in the data. Therefore, CRAs are still providing important information to financial markets.
    Keywords: Single Equation Models; Single Variables: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Model Construction and Estimation; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies;
    JEL: C25 C51 G24
    Date: 2014
  7. By: Bontemps, Christophe; Nauges, Céline
    Abstract: Individuals are commonly surveyed about their perception or assessment of risk and these variables are often used to explain individuals’ actions to protect themselves against these risks. Perceptions appear as endogenous variables in traditional theoretical averting-decision models but, quite surprisingly, endogeneity of perceived risk is not always controlled for in empirical studies. In this article, we present different models that can be useful to the practitioner when estimating binary averting-decision models featuring an endogenous discrete variable (such as risk perception). In particular we compare the traditional bivariate probit model with the special regressor model, which is less well known and relies on a different set of assumptions. In the empirical illustration using household data from Australia, Canada, and France, we study how the perceived health impacts of tap water affect a household’s decision to drink water from the tap. Individuals’ perceptions are found to be endogenous and significant for all models, but the estimated marginal effect is sensitive to the model and underlying assumptions. The special regressor appears to be a valuable alternative to the more common bivariate probit model.
    Keywords: Discrete choice, special regressor, endogeneity, water consumption.
    JEL: C14 C25 Q51 Q53
    Date: 2014–11–05
  8. By: Pinto, Hugo
    Abstract: Maritime and marine activities are getting significant attention from European policy as a domain that encompasses economic sectors of traditional relevance and new ones of fast growth. This short communication presents the results of a survey applied to maritime and marine organizations in Portugal, Spain, Ireland and United Kingdom. Innovation, human capital and social capital are dimensions that deserve attention in the creation and consolidation of the Blue economy. The empirical study uses survey data to estimate an econometric ordered Logit model to understand the determinants of cooperation. The study found that the participation in innovation activities and the level of absorptive capacity are critical aspects to induce cooperation.
    Keywords: maritime cluster; proximity; innovation; social capital; human capital; absorptive capacity; LOGIT.
    JEL: C51 L21 O31 R00
    Date: 2014–06–30

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