nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2015‒02‒11
three papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Multiproduct firms, income distribution, and trade By Marcia M. A. Schafgans; Joachim Stibora
  2. Managing rational routes to randomness By Schmitt, Noemi; Westerhoff, Frank
  3. Networks and Selection in International Migration to Spain By Nina Neubecker; Marcel Smolka; Anne Steinbacher

  1. By: Marcia M. A. Schafgans; Joachim Stibora
    Abstract: We develop a general equilibrium model of multiproduct fi…rms with quality differentiated goods. Households are characterized by an heterogeneous taste for the differentiated good and their income level. The use of non-homothetic preferences and vertical product differentiation (product quality) enables us to analyze how distributional changes in income affect the number of vertically differentiated …firms, their product range and prices in the presence of strategic interaction across …rms. The implications of lowering the barriers to trade within this setting are considered as well.
    Keywords: multiproduct firms; endogenous product scope; product quality; income distribution; discrete choice; trade liberalization; Oligopoly
    JEL: J1
    Date: 2014–04
  2. By: Schmitt, Noemi; Westerhoff, Frank
    Abstract: Within the seminal cobweb model of Brock and Hommes, firms adapt their price expectations by a profit-based switching behavior between free näive expectations and costly rational expectations. Brock and Hommes demonstrate that fixed-point dynamics may turn into increasingly complex dynamics as the firms' intensity of choice increases. We show that policy-makers are able to manage rational routes to randomness by adjusting profit taxes. As suggested by our analytical and numerical analysis, policy-makers should increase (decrease) profit taxes if destabilizing expectations generate higher (lower) profits than stabilizing expectations to alter the composition of applied expectation rules and thereby to promote market stability. Our results are not restricted to cobweb models: a huge body of literature demonstrates that rational routes to randomness may emerge in many different markets.
    Keywords: cobweb models,discrete choice approach,intensity of choice,profit taxes,stability analysis,policy implications
    JEL: D84 E30 Q11
    Date: 2015
  3. By: Nina Neubecker (DIW, Berlin, Germany); Marcel Smolka (Department of Economics and Business, Aarhus University, Denmark); Anne Steinbacher
    Abstract: This paper provides new evidence on migrant networks as determinants of the scale and skill structure of migration, using aggregate data from a recent migration boom to Spain. We develop a three-level nested multinomial logit migration model. Our model accommodates varying degrees of similarity of destinations located in the same region (or the same country), allowing for a rich structure of substitutability across alternative destinations. We find strong positive network effects on the scale of migration and a strong negative effect on the ratio of high-skilled to low-skilled migrants. Simplifying restrictions on substitutability across destinations are rejected by the data.
    Keywords: international migration, migrant networks, nested multinomial, logit model, skill structure of migration, Spain
    JEL: F22 J61
    Date: 2015–01–26

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