nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2016‒07‒30
three papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. The demand for index-based flood insurance in a high-income country By Achtnicht, Martin; Osberghaus, Daniel
  2. Calibration of Quantum Decision Theory, Aversion to Large Losses and Predictability of Probabilistic Choices By Sabine Vincent; Tatyana Kovalenko; Vyacheslav I. Yukalov; Didier Sornette
  3. Determinantes de la morosidad de la cartera de microcrédito en Colombia By Felipe Clavijo Ramírez

  1. By: Achtnicht, Martin; Osberghaus, Daniel
    Abstract: Flood insurance helps to cope with the risk of flooding, but take-up rates are relatively low. Insurance density could rise if index-based insurance (IBI) were provided as an alternative to traditional damage-based insurance (DBI). We analyze whether there is potential for private demand for IBI in Germany. We use data from a discrete choice experiment combined with damage data for a major flood in 2013. We find IBI to attract similar customers as DBI, while DBI is preferred on average. Our results suggest that not many new customers would enter the market, once IBI were available.
    Keywords: Climate Change,Discrete Choice Experiment,Floods,Insurance,Index-based
    JEL: Q54 G22 D14
    Date: 2016
  2. By: Sabine Vincent (ETH Zurich); Tatyana Kovalenko (ETH Zurich); Vyacheslav I. Yukalov (Joint Institute for Nuclear Research; D-MTEC, ETH Zurich); Didier Sornette (Swiss Finance Institute; ETH Zürich - Department of Management, Technology, and Economics (D-MTEC))
    Abstract: We present the first calibration of quantum decision theory (QDT) to an empirical data set. The data comprise 91 choices between two lotteries (two "prospects") presented in 91 random pairs made by 142 subjects offered at two separated times. First, we quantitatively account for the fraction of choice reversals between the two repetitions of the decisions, using a probabilistic choice formulation in the simplest possible form with no model assumption and no adjustable parameter. The prediction of choice reversal is then refined by introducing heterogeneity between decision makers through a differentiation of the population into two similar sized groups in terms of "over-confident" and "contrarian" decision makers. This supports the first fundamental tenet of QDT, which models the choice of an option as an inherent probabilistic process, such that the probability of a choice can be expressed as the sum of its utility and attraction factors. We propose to model (a) the utility factor with a stochastic version of cumulative prospect theory (logit-CPT), and (b) the attraction factor with a constant absolute risk aversion (CARA) function. This makes logit-CPT nested in our proposed parameterisation of QDT, allowing for a precise quantitative comparison between the two theories. For this data set, the QDT model is found to perform better at both the aggregate and individual levels, and for all considered fit criteria both for the first iteration of the experiment and for predictions (second iteration). The QDT effect associated with the attraction factor is mostly appreciable for prospects with big losses. Our quantitative analysis of the experiment results supports the existence of an intrinsic limit of predictability, which is associated with the inherent probabilistic nature of choice.
    Keywords: Quantum decision theory, QDT, prospect probability, utility factor, attraction factor, interference, parametrization, hierarchical estimation method, calibration, empirical data, simple gambles, stochastic Cumulative prospect theory, logit-CPT, probabilistic decision making, limits of predictability
    JEL: C44 D81
  3. By: Felipe Clavijo Ramírez (Banco de la República de Colombia)
    Abstract: El microcrédito es una modalidad de préstamos orientada a financiar microempresas, hogares y personas que tienen acceso limitado al mercado de crédito formal. Teniendo en cuenta que desde 2002 la cartera de microcrédito ha crecido en la mayoría del tiempo a un ritmo mayor que la cartera total del sistema financiero y que esta modalidad de préstamos presenta un deterioro en los indicadores de riesgo de crédito desde finales de 2011, el objetivo de este trabajo es identificar los principales determinantes de la morosidad de los deudores en el pago de los microcréditos. Con tal fin, se hace uso del concepto de Información Suave, que incluye variables socioeconómicas de los deudores y características de las microempresas para determinar su impacto sobre la probabilidad de mora. Usando las metodologías Probit y Logit multinomial se encuentra que entre 2002 y mediados de 2014, existe evidencia estadística a favor de la hipótesis de que variables tales como la edad del deudor, el género, el número de personas que tiene a su cargo, el tipo de vivienda en que vive, los años de experiencia en la actividad que desarrolla, entre otras, clasificadas dentro de la categoría de Información Suave, tienen una relación significativa con dicha morosidad. Classification JEL: C34, C35, D40, G21
    Keywords: Microcrédito, Colombia, morosidad, probabilidad de incumplimiento, información suave, Probit, Logit multinomial
    Date: 2016–07

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