nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2015‒12‒28
five papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. A Stated Preference Study of the Chesapeake Bay and Watershed Lakes By Chris Moore; Dennis Guignet; Kelly B. Maguire; Chris Dockins; Nathalie B. Simon
  2. Modeling the Effects of Grade Retention in High School By Bart Cockx; Stijn Baert; Matteo Picchio
  3. Valuing the benefits of improved marine environmental quality under multiple stressors By Heidi Tuhkanen; Evelin Urbel-Piirsalu; Tea Nõmmann; Mikołaj Czajkowski; Nick Hanley
  4. Controlling for Compromise Effects Debiases Estimates of Preference Parameters By Jonathan P. Beauchamp; Daniel J. Benjamin; Christopher F. Chabris; David I. Laibson
  5. Inferring Risk Perceptions and Preferences using Choice from Insurance Menus: Theory and Evidence By Keith Marzilli Ericson; Philipp Kircher; Johannes Spinnewijn; Amanda Starc

  1. By: Chris Moore; Dennis Guignet; Kelly B. Maguire; Chris Dockins; Nathalie B. Simon
    Abstract: The Chesapeake Bay is the largest estuary in the United States and the third largest in the world. The surrounding Watershed encompasses 64,000 square miles, and is home to about 18 million people. There have been numerous studies measuring the value of different components of the Chesapeake Bay but no study or set of studies provides a comprehensive estimate of the values associated with the improvements likely to result from recently implemented pollution limits. To fill this gap we developed a stated preference (SP) survey that uses a discrete choice experiment response format to examine households’ willingness to pay (WTP) for water quality improvements in the Chesapeake Bay. During extensive focus group testing, care was taken to identify the environmental attributes that are most important to both users and non-users and to quantitatively describe these attributes using understandable and tangible metrics. The survey was mailed to a stratified random sample of households across 17 states in the eastern U.S. and the District of Columbia. This paper reports the results of the empirical analysis, including marginal WTP estimates for each environmental attribute and total WTP for the expected outcome of the pollution reduction program. A comparison of WTP across households suggests that a substantial portion of the benefits can be attributed to nonusers. Results also show that benefits from improving water quality in freshwater lakes in the Watershed are an important ancillary benefit likely to result from reducing pollution in the Bay.
    Keywords: Chesapeake Bay, choice experiment, stated preference, TMDL, water quality
    JEL: Q51 Q53
    Date: 2015–11
  2. By: Bart Cockx (Ghent University (SHERPPA), Université catholique de Louvain (IRES), IZA and CESifo); Stijn Baert (Ghent University (SHERPPA), University of Antwerp, Université catholique de Louvain (IRES) and IZA); Matteo Picchio (Department of Economics and Social Sciences, Marche Polytechnic University; CentER, Tilburg University; Sherppa, Ghent University; IZA)
    Abstract: A dynamic discrete choice model is set up to estimate the effects of grade retention in high school, both in the short- (end-of-year evaluation) and long-run (drop-out and delay). In contrast to regression discontinuity designs, this approach captures treatment heterogeneity and controls for grade-varying unobservable determinants. A method is proposed to deal with initial conditions and with partial observability of the track choices at the start of high school. Forced track downgrading is considered as an alternative remedial measure. In the long-run, grade retention and its alternative have adverse effects on schooling outcomes and, more so, for less able pupils.
    Keywords: Education, grade retention, track mobility, dynamic discrete choice models, heterogeneous treatment effects
    JEL: C33 C35 I21
    Date: 2015–12–12
  3. By: Heidi Tuhkanen (Stockholm Environmental Institute); Evelin Urbel-Piirsalu (Stockholm Environmental Institute); Tea Nõmmann (Stockholm Environmental Institute); Mikołaj Czajkowski (Faculty of Economic Sciences, University of Warsaw); Nick Hanley (University of St Andrews, Department of Geography and Sustainable Development)
    Abstract: Many marine and coastal ecosystems are under increasing pressure from multiple stressors. In the Baltic Sea, these stressors include oil and chemical spills from shipping, nutrient run-off from land and invasive species. All of these pressures have been rising over the recent past. Increasing pressures lead to reductions in environmental quality, which produce negative effects on human well-being. In this paper, the choice experiment method is used to estimate the benefits to people in Estonia resulting from reductions in pressure from multiple stressors in the Baltic.
    Keywords: multiple stressors, Good Environmental Status, marine and coastal water quality, choice experiments, oil and chemical spills, eutrophication, invasive species
    JEL: Q51 O13 Q56 Q57 Q58 Q34
    Date: 2015
  4. By: Jonathan P. Beauchamp; Daniel J. Benjamin; Christopher F. Chabris; David I. Laibson
    Abstract: The compromise effect—a tendency to choose options close to the "middle" of a choice set—has been shown to confound measurement of preferences. In an experiment with 550 participants, we study risk preferences elicited with Multiple Price Lists. Following prior work, we manipulate the compromise effect by varying the middle options of each Multiple Price List and find that measured risk-preference estimates are sensitive to this change in the choice set. To eliminate this bias, we incorporate context effects directly into a structural econometric model. We show that this method generates robust estimates of preference parameters.
    JEL: B49 D03 D14 D83 G11
    Date: 2015–12
  5. By: Keith Marzilli Ericson; Philipp Kircher; Johannes Spinnewijn; Amanda Starc
    Abstract: Demand for insurance can be driven by high risk aversion or high risk. We show how to separately identify risk preferences and risk types using only choices from menus of insurance plans. Our revealed preference approach does not rely on rational expectations, nor does it require access to claims data. We show what can be learned non-parametrically from variation in insurance plans, offered separately to random cross-sections or offered as part of the same menu to one cross-section. We prove that our approach allows for full identification in the textbook model with binary risks and extend our results to continuous risks. We illustrate our approach using the Massachusetts Health Insurance Exchange, where choices provide informative bounds on the type distributions, especially for risks, but do not allow us to reject homogeneity in preferences.
    JEL: D8 I13
    Date: 2015–12

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