nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2015‒03‒13
eleven papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Preferences for urban green spaces and peri-urban forests: An analysis of stated residential choices By Gengyang Tu; Jens Abildtrup; Serge Garcia
  2. Eliciting farmers’ valuation for abiotic stress-tolerant rice in India: By Arora, Anchal; Bansal, Sangeeta; Ward, Patrick S.
  3. The awareness and willingness of air travellers to pay for voluntary carbon offsets and their co-benefits By Cheung, Jimmy; Kragt, Marit; Burton, Michael
  4. Is the income elasticity of the willingness to pay for pollution control constant? By Edward S. Barbier; Mikołaj Czajkowski; Nick Hanley
  5. Separating State Dependence, Experience, and Heterogeneity in a Model of Youth Crime and Education By Maria Antonella Mancino; Salvador Navarro; David A. Rivers
  6. Eliciting Consumer WTP for Food Characteristics in a Developing Context: Comparison of four methods in a field experiment By Alphonce, Roselyne; Alfnes, Frode
  7. How Do Consumers Choose Health Insurance? – An Experiment on Heterogeneity in Attribute Tastes and Risk Preferences By Nadja Kairies-Schwarz; Johanna Kokot; Markus Vomhof; Jens Wessling
  8. Divergence in Stakeholders’ Preferences: Evidence from a Choice Experiment on Forest Landscapes Preferences in Sweden By Nordén, Anna; Coria, Jessica; Jönsson, Anna Maria; Lagergren, Fredrik; Lehsten, Veiko
  9. Certainty and Overconfidence in Future Preferences for Food By Linda Thunström; Jonas Nordström; Jason F. Shogren
  10. Approche empirique des performances économiques et financières des exploitations installées aidées en Bretagne By Laura PICAUD; Aude RIDIER; Carole Ropars-Collet
  11. Fair farming: Preferences for fair labor certification using four elicitation methods By Drichoutis, Andreas C.; Vassilopoulos, Achilleas; Lusk, Jayson; Nayga, Rodolfo M.

  1. By: Gengyang Tu (Laboratoire d'Economie Forestière, INRA - AgroParisTech); Jens Abildtrup (Laboratoire d'Economie Forestière, INRA - AgroParisTech); Serge Garcia (Laboratoire d'Economie Forestière, INRA - AgroParisTech)
    Abstract: This paper assesses the value of urban green spaces, specifically peri-urban forests and their potential substitutes, for the local population on the basis of their residential choice. We applied a choice experiment (CE) that focuses on trade-offs between private housing characteristics and the environmental aspects of neighborhood. Individual willingness to pay (WTP) is estimated from a latent class model and a mixed logit model along with a WTP space approach. Our results show that green spaces provide both direct use value (recreation) and indirect use value (scenic views). We find that peri-urban forests and parks are not substitutes. However, ownership of a private garden reduces the WTP to live closer to an urban park.
    Keywords: Choice experiment, residential location, urban green spaces, latent class model, mixed logit model, willingness-to pay space
    JEL: Q26 Q51 C5
    Date: 2015–02
  2. By: Arora, Anchal; Bansal, Sangeeta; Ward, Patrick S.
    Abstract: Abiotic stresses such as droughts and floods significantly constrain rice production in India. New stress-tolerant technologies have the potential to reduce yield variability and help insulate farmers from the risks posed by these hazards. This study aims to explore the potential adoption of these risk-reducing technologies. Using discrete choice experiments conducted in rural Odisha, we estimate farmers’ valuation for drought-tolerant and submergence-tolerant traits embodied in paddy cultivars. We find that farmers value both yield-increasing traits and variability-reducing traits. Interestingly, we find exceptionally high willingness to pay for short-duration varieties. We also attempt to capture heterogeneity in preferences. Our results show that farmers in both drought-prone and flood-prone regions value the reduction in yield variability offered by cultivars.
    Keywords: Droughts, abiotic stress, Flooding, Rice, yields, Risk, Seeds, Varieties, Tolerance, Drought tolerance, Flooding tolerance, submergence tolerance, discrete choice experiment, Willingness to pay, Odisha,
  3. By: Cheung, Jimmy; Kragt, Marit; Burton, Michael
    Abstract: Several airlines in Australia have initiated voluntary carbon offset (VCO) programs, called 'Fly Carbon Neutral', to encourage their customers to offset the carbon emissions of their flight. A VCO scheme aims to 'neutralise' emissions from a particular activity, by compensating with carbon reduction projects in another sector. As well as carbon sequestration, these activities often bring secondary benefits such as wildlife protection. There are currently few studies about the awareness and willingness to pay to offset carbon emission from flying. This paper conducted a choice experiment study to address this knowledge gap, by estimating Australian air travellers' willingness to pay for different attributes of carbon offset projects. Analyses reveal that values for carbon offset projects depend on respondent's perceptions of the importance of the aviation industry's contribution to the global carbon emissions, membership of environmental organisation, education level, income and their age. Results show that the majority of respondents preferred to not buy an offset. Of those respondents willing to buy an offset, most preferred renewable energy projects located in their own state over reforestation or forest protection projects in other states or overseas. The results will provide a better understanding of air travellers' preference, thus to improve future carbon offset policies making.
    Keywords: Carbon offsets, Aviation industry, Willingness to pay, Choice experiments, Choice modelling, Australia, Environmental Economics and Policy, Q51, Q57,
    Date: 2015–03–05
  4. By: Edward S. Barbier (Department of Economics & Finance, University of Wyoming); Mikołaj Czajkowski (Faculty of Economic Sciences, University of Warsaw); Nick Hanley (University of St Andrews, School of Geography and Sustainable Development)
    Abstract: This paper explores both theoretically and empirically whether or not the willingness to pay (WTP) for pollution control varies with income. Our model indicates that the income elasticity of the marginal WTP for pollution reduction is only constant under very restrictive conditions, which are not necessary for an environmental Kuznets curve relationship between pollution and income. Our empirical analysis tests the null hypothesis that the elasticity of the WTP for pollution control with respect to income is constant, employing a multi-country contingent valuation study of eutrophication reduction in the Baltic Sea. Our findings reject this hypothesis, and estimate an income elasticity of the WTP for eutrophication control of 0.1 - 0.2 for low-income respondents and 0.6 - 0.7 for high-income respondents. Thus, our empirical results suggest that the elasticity is not constant and always less than one.
    Keywords: Baltic Sea, benefit transfer, environmental Kuznets curve, eutrophication, income elasticity of willingness to pay, non-market valuation
    JEL: Q51 Q53 Q56
    Date: 2015
  5. By: Maria Antonella Mancino (University of Western Ontario); Salvador Navarro (University of Western Ontario); David A. Rivers (University of Western Ontario)
    Abstract: We study the determinants of youth crime using a dynamic discrete choice model of crime and education. We allow past education and criminal activities to affect current crime and educational decisions. We take advantage of a rich panel dataset on serious juvenile offenders, the Pathways to Desistance. Using a series of psychometric tests, we estimate a model of cognitive and social/ emotional skills that feeds into the crime and education model. This allows us to separately identify the roles of state dependence, returns to experience, and heterogeneity in driving crime and enrollment decisions among youth. We find small effects of experience and stronger evidence of state dependence for crime and schooling. We provide evidence that, as a consequence, policies that affect individual heterogeneity (like social/emotional skills), and those that temporarily keep youth away from crime, can have important and lasting effects even if criminal experience has already accumulated.
    Keywords: Crime; Education; Youth
    JEL: I21 K42
    Date: 2015
  6. By: Alphonce, Roselyne (School of Economics and Business, Norwegian University of Life Sciences); Alfnes, Frode (School of Economics and Business, Norwegian University of Life Sciences)
    Abstract: This paper aims at answering two objectives;1) assess consumer preference and willingness to pay for organic and food safety inspected tomatoes in a traditional African food market; 2) compare willingness to pay for the tomato attributes in four different elicitation techniques. We elicit willingness to pay for conventional, organic and/or food-safetyinspected tomatoes using methods that can be conducted with one respondent at a time: the Becker–DeGroot–Marschak mechanism, multiple price lists, multiple price lists with stated quantities, and real-choice experiments. All methods show that consumers are willing to pay a premium for organic and food-safety-inspected tomatoes. However, the size of the premium is significantly larger when consumers choose between alternatives than when they indicate their reservation price. Throughout the paper, we discuss method implementation issues for this context and make method recommendations for future research.
    Keywords: elicitation methods; framed field experiments; organic; food-safety inspected; Tanzania; WTP
    JEL: C93 D12 Q10 Q13
    Date: 2015–03–05
  7. By: Nadja Kairies-Schwarz; Johanna Kokot; Markus Vomhof; Jens Wessling
    Abstract: Recent health policy reforms try to increase consumer choice. We use a laboratory experiment to analyze consumers’ tastes in typical contract attributes of health insurances and to investigate their relationship with individual risk preferences. First, subjects make consecutive insurance choices varying in the number and types of contracts offered. Then, we elicit individual risk preferences according to Cumulative Prospect Theory. Applying a latent class model to the choice data, reveals five classes of consumers with considerable heterogeneity in tastes for contract attributes. From this, we infer distinct behavioral strategies for each class. The majority of subjects use minimax strategies focusing on contract attributes rather than evaluating probabilities in order to maximize expected payoffs. Moreover, we show that using these strategies helps consumers to choose contracts, which are in line with their individual risk preferences. Our results reveal valuable insights for policy makers of how to achieve efficient consumer choice.
    Keywords: Health insurance; risk preferences; heterogeneity; heuristics; laboratory experiment; cumulative prospect theory
    JEL: C91 I13 D81
    Date: 2014–12
  8. By: Nordén, Anna (Department of Economics, School of Business, Economics and Law, Göteborg University); Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University); Jönsson, Anna Maria (Lund University); Lagergren, Fredrik (Lund University); Lehsten, Veiko (Lund University)
    Abstract: A great deal of biodiversity can be found in private forests, and protecting it requires taking into consideration the preferences of key stakeholders. In this study, we examine and compare the valuation of forest attributes across the general public, private non-industrial forest owners and forest officials in Sweden by conducting a choice experiment. Our results indicate that citizens have a positive valuation of biodiversity protection. Moreover, their valuation is statistically higher than those of forest owners, implying that there is room for compensation. Interestingly, our results suggest that both forest owners and forest officials have a strong orientation towards production, with higher valuation than the general public of the common management practice of similar age and clear felling. Even though the Swedish Forestry Act regards production and environmental goals as equally important, we find that forest officials prefer management practices that promote production rather than biodiversity protection.
    Keywords: biodiversity; choice experiment; forest; preference divergence
    JEL: D61 Q23 Q51 Q58
    Date: 2015–03
  9. By: Linda Thunström (HUI Research AB; Department of Economics and Finance, University of Wyoming); Jonas Nordström (Department of Food and Resource Economics, University of Copenhagen; Lund University School of Economics and Management); Jason F. Shogren (Department of Economics and Finance, University of Wyoming)
    Abstract: We examine consumer certainty of future preferences and overconfidence in predicting future preferences. We explore how preference certainty and overconfidence impact the option value to revise today’s decisions in the future. We design a laboratory experiment that creates a controlled choice environment, in which a subject's choice set (over food snacks) is known and constant over time, and the time frame is short -- subjects make choices for themselves today, and for one to two weeks ahead. Our results suggest that even for such a seemingly straightforward choice task, only 45 percent of subjects can predict future choices accurately, while stated certainty of future preferences (one and two weeks ahead) is around 80 percent. We define overconfidence in predicting future preferences as: the difference between actual accuracy at predicting future choices and stated certainty of future preferences. Our results suggest strong evidence of overconfidence. We find that overconfidence increases with the level of stated certainty of future preferences. Finally, we observe that the option value people attach to future choice flexibility decreases with overconfidence. Overconfidence in future preferences affects economic welfare because it says people have too much incentive to lock themselves into future suboptimal decisions.
    Keywords: Choice flexibility, Preference uncertainty, Overconfidence, Sub-optimal decisions, Food
    JEL: D03 D12 D83 D90
    Date: 2015–03
  10. By: Laura PICAUD (Chambre Régionale d'Agriculture de Bretagne); Aude RIDIER (Structures et Marchés Agricoles, Ressources et Territoires, INRA); Carole Ropars-Collet (Structures et Marchés Agricoles, Ressources et Territoires, INRA)
    Abstract: L’objet de cette communication est d’évaluer la performance économique et financière des exploitations installées et aidées, dans la phase de croissance des dix ans suivant l’installation, et d’analyser quels sont les facteurs qui influent sur cette performance. On s’interroge si certains types d’entreprises, ou certains systèmes de productions sont plus exposés que d’autres à ces risques financiers. A l’aide d’un modèle logit multinomial, plusieurs facteurs susceptibles d’influer, d’après la littérature, sur le risque financier sont testés, parmi lesquels des facteurs structurels de long terme et des facteurs économiques et financiers de court ou moyen terme. Il apparaît que les facteurs économiques sont des leviers susceptibles d’agir significativement à court terme sur le risque financier. Dans les facteurs structurels, les conditions de l’installation et le statut juridique de l’exploitation jouent significativement.
    Keywords: installation, jeunes agriculteurs, performance économique et financière, modèle logit multinomial
    Date: 2015
  11. By: Drichoutis, Andreas C.; Vassilopoulos, Achilleas; Lusk, Jayson; Nayga, Rodolfo M.
    Abstract: High profile cases of exploitative labor practices have increased concerns over agricultural working conditions. However, it is unclear whether and to what extent the public is willing to trade-off fair working conditions for higher prices and food imports. We implement a large-scale survey to uncover Greek consumer preferences for a food labeling system that certifies fair working conditions for the workers employed at all production stages of agricultural production. Empirical findings from several disciplines suggest that results from contingent valuation surveys can be susceptible to hypothetical bias, social desirability bias, and lack of consequentiality. To test these issues, we use the 'cheap talk' method (Kling et al., 2012), Lusk and Norwood's (2009) Inferred Valuation (IV) method and the consequentiality scripts employed in Vossler and Evans (2009) and Vossler and Watson (2013). We also test predictions of reference dependent theory by testing whether framing the valuation question as an 'Equivalent Loss' (EL) differs from classical 'Willingness-to-pay elicitation' (WTP). We collected responses from more than 3,800 consumers in the cities of Athens and Ioannina in Greece. Our results show that neither the cheap talk nor the consequentiality script had any effect on elicited valuations. In contrast, the IV method appears to mitigate social desirability bias. We also find that values elicited under WTP are larger than values elicited under EL, which rejects neoclassical preferences. When social desirability is taken out of our estimates, we find that consumers are willing to pay an average premium of 72 cents/Kg for strawberries with fair labor certification, which is equivalent to 49% of current market prices.
    Keywords: fair labor label; willingness to pay; equivalent loss; contingent valuation; inferred valuation; consequentiality; cheap talk; uncertainty scale
    JEL: C83 C93 D12 Q13
    Date: 2015–03–03

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