nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2016‒06‒04
eight papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. The axiomatic foundation of logit and its relation to behavioral welfare By Breitmoser, Yves
  2. On the Use of the BDM Mechanism in Non-Hypothetical Choice Experiments By Bazzani, Claudia; Nayga, Rodolfo M. Jr.; Caputo, Vincenzina; Canavari, Maurizio; Danforth, Diana M.
  3. Eliciting Demand for Flood Insurance under Climate Change: A Choice Experiment Approach By Lyu, Ya-Pin; Chang, Ching-Cheng; Chen, Shu-Ling
  4. Are WTP Estimates for Fruit Quality Similar between Growers and Consumers? Results of a Choice Experiment on Four Rosaceous Fruit Crops By Gallardo, R. Karina; Yue, Chengyan; McCracken, Vicki; Luby, James; McFerson, James
  5. Which Smart Electricity Service Contracts Will Consumers Accept? The demand for compensation in a platform market By Laura-Lucia Richter; Michael G. Pollitt
  6. Drivers of Demand for Specialty Crops: The Example of Arizona-Grown Medjool Dates By Grebitus, Carola; Peschel, Anne; Hughner, Renee Shaw
  7. Scope Insensitivity in Child's Health Risk Reduction: A Comparison of Damage Schedule and Choice Experiment Methods By Mahasuweerachai, Phumsith; Pangjai, Siwarut
  8. Small farmers’ preferences for the design of certification schemes: Does gender matter? By Meemken, Eva-Marie; Veettil, Prakashan Chellattan; Qaim, Matin

  1. By: Breitmoser, Yves
    Abstract: Multinomial logit is the canonical model of discrete choice and widely used to analyze preferences and welfare. Its axiomatic foundation is incomplete: binomial logit is assumed; independence of irrelevant alternatives extends logit to multinomial choice. The present paper provides a self-contained foundation, showing that the axiom "binomial choice is logit" is behaviorally founded by "narrow bracketing" and "no systematic mistakes" (e.g. default effects). This in turn allows me to drop the no-mistakes axiom, yielding generalized logit accounting for systematic mistakes axiomatically consistently. The results position logit in the "mistakes-debate" in behavioral welfare and clarify the foundation for the functional form.
    Keywords: logit, axiomatic foundation, discrete choice, utility estimation, welfare
    JEL: D03
    Date: 2016–05–28
  2. By: Bazzani, Claudia; Nayga, Rodolfo M. Jr.; Caputo, Vincenzina; Canavari, Maurizio; Danforth, Diana M.
    Abstract: To potentially reduce bias in hypothetical choice experiments, many studies have incentivized respondents to reveal more truthful choices by randomly choosing a binding choice set and then asking them to pay the price indicated for the chosen product alternative in this binding choice set. This approach, however, does not separate what the price the respondent indicated he/she is willing to pay for the chosen product alternative from the price that he/she will end up paying. Would the use of the BDM mechanism make non-hypothetical choice experiments more incentive compatible? Our results using a conventional homegrown choice experiment and an induced value choice experiment suggest that it does not. Choice behavior is associated with the degree of understanding about the experimental procedures and the amount of time devoted to each choice set
    Keywords: Real Choice Experiment, BDM mechanism, Induced Value Experiment, Homegrown Value Experiment, Incentive Compatibility, Institutional and Behavioral Economics, Marketing, Research Methods/ Statistical Methods,
    Date: 2016–05–25
  3. By: Lyu, Ya-Pin; Chang, Ching-Cheng; Chen, Shu-Ling
    Abstract: The purpose of this study is to unveil the nature of individual’s preference for PPP flood insurance alternatives under climate change using the choice experiment method and a case study in Tainan City in Taiwan. Our estimates shows that respondents who perceived increasingly higher risks in agriculture and fishery industry were less likely to buy flood insurance. Several reasons could account for their inactiveness in insurance purchase, including insufficient knowledge and financial capacity, over-reliance on government relief, and the lack of diverse insurance alternatives to meet local industrial needs. The simulated market penetration under different climate scenarios also reveals the market potentials do exist and will grow in the future while climate conditions get worse.
    Keywords: Private-Public-Participation, Flood Insurance, Choice Experiment, Market Penetration, Risk Perception, Demand and Price Analysis, Financial Economics, Institutional and Behavioral Economics, Risk and Uncertainty, Q54, Q58, G22, G32,
    Date: 2016–05
  4. By: Gallardo, R. Karina; Yue, Chengyan; McCracken, Vicki; Luby, James; McFerson, James
    Abstract: WTP research is typically applied to consumer groups. Scant applied economics research has been done to elicit producers’ preferences and values for fruit quality, despite the important role producers play in the supply chain, as they take the financial risk to invest in a promising cultivar, making it accessible to the consumer in the marketplace through a sometimes complex supply chain. Our results show evidence that fresh market fruit producers are generally aligned with consumer preferences, as flavor and textural components were consistently given the highest WTP value among other fruit quality characteristics. However, market intermediaries (e.g., shippers, packers, marketers) do not exhibit the same preferences across all crops. The specific economic valuation placed by growers, market intermediaries, and consumers on individual attributes can now provide breeding programs more specific information to evaluate the fruit quality trait, and the targeted levels for that trait, within their programs.
    Keywords: WTP, consumers, producers, intermediaries, quality, fruit, Agribusiness, Consumer/Household Economics, Demand and Price Analysis, Q13,
    Date: 2016
  5. By: Laura-Lucia Richter; Michael G. Pollitt
    Abstract: This paper considers the heterogeneity of household consumer preferences for electricity service contracts in a smart grid context. The analysis is based on original data from a discrete choice experiment on smart electricity service contracts that was designed and conducted in collaboration with Accent and 1,892 UK electricity consumers in 2015. The results suggest that while customers are willing to pay for technical support services, they are likely to demand significant compensation to share their usage and personally identifying data and to participate in automated demand response programs. Based on these findings potential platform pricing strategies that could incentivise consumers to participate in a smart electricity platform market are discussed. By combining appropriate participation payments with sharing of bill savings, service providers could attract the number of customers required to provide the optimal level of demand response. We also examine the significant heterogeneity among customers to suggest how, by targeting customers with specific characteristics, smart electricity service providers could significantly reduce their customer acquisition costs.
    Keywords: Discrete Choice Experiment, smart energy, Willingness-to-Accept, platform markets
    JEL: C18 C38 D12 L94 Q42 Q55
    Date: 2016–05–16
  6. By: Grebitus, Carola; Peschel, Anne; Hughner, Renee Shaw
    Abstract: Recently, gross production of Medjool dates has approximately doubled in Arizona, with the growing region increasing to over 3,000 harvested acres in 2014. As the supply of Medjool dates increases, consumer demand needs to increase accordingly. This research aims to investigate consumer preferences for specialty crops such as Medjool dates. This paper analyzes the impact of Arizona Grown and California Grown labeling on consumer preferences for Medjool dates applying choice experiments. Furthermore, the influence of pesticide-free labeling and GMO-free labeling on willingness to pay is tested both individually and as interaction effect. Results show that consumers prefer dates grown in California and Arizona over dates not labeled for region of origin. Between California and Arizona, those dates originating in California are preferred. Also, pesticide free and GM-free dates are preferred with pesticide free having a larger impact on choices. Overall, results can be used by stakeholders to create target oriented marketing activities.
    Keywords: Choice experiments, Medjool dates, Preferences, Arizona grown, Pesticide free, GMO free, Agribusiness, Marketing, M31, Q13,
  7. By: Mahasuweerachai, Phumsith; Pangjai, Siwarut
    Abstract: The focus of this study is to explore the issue of scope insensitivity concerning two different elicitation formats with regard to differences in preferences distributions. For this purpose, we apply choice experiment (CE) and damage schedule (DM) methods to elicit preferences for different child’s health risk reductions in school in Thailand. The data comes from 1,116 parents who have at least one child attending school from prepared kindergarten to grade 9. Empirical evidences first suggest that these two methods provide the same preferences of respondents on the most preferred and the least preferred of risk reduction issues. However, scope insensitivity occurs for some risk reductions issues elicited by CE. Namely, willingness to pay of higher level of risk reduction and those of lower level of risk reduction in the same issue are statistically indifferent. On the other hand, there is no occurrence of scope insensitivity in all risk reduction issues obtained by DM. This pattern is still unchanged even when the sample is separately analyzed by socio-economic factors such as education and income.
    Keywords: Scope insensitivity, Damage schedule, Choice experiment, Health risk, Health Economics and Policy, Risk and Uncertainty, D61, H43, I18,
    Date: 2016
  8. By: Meemken, Eva-Marie; Veettil, Prakashan Chellattan; Qaim, Matin
    Abstract: Farmers’ preferences for sustainability certification are analyzed, building on a choice experiment conducted with smallholder coffee growers in Uganda. Farmers have positive general attitudes towards certification. While they dislike bans of productivity-enhancing inputs, benefits associated with agricultural training and special female support are appreciated. Many also see requirements that have to be met for certification as a welcome nudge to invest in better farm management and quality upgrading. Gender-disaggregated data reveal that female farmers have a higher preference for sustainability certification than male farmers. Also within households, significant preference heterogeneity between males and females is found for some certification attributes.
    Keywords: Choice experiment, farmer preferences, food standards, gender, mixed logit models, Agricultural and Food Policy, Community/Rural/Urban Development, Consumer/Household Economics, Food Security and Poverty, Q01, Q12, Q13, Q18,
    Date: 2016

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