nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2016‒08‒28
five papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Mesure de la pauvreté multidimensionnelle selon l’approche par Counting : application à la Mauritanie By Philippe Le Coent; Raphaelle Préget; Sophie Thoyer
  2. Willingness to Pay for Revegetating the City of Subiaco’s Railway Reserve. A Choice Experiment to Determine Public Preferences By de Vos, Gunther; Kragt, Marit E; Pandit, Ram
  3. The Surplus Identification Task and Limits to Multi-Attribute Consumer Choice By Lunn, Pete; Bohacek, Marek; McGowan, Feidhlim
  4. Subsidies and Myopia in Technology Adoption: Evidence from Solar Photovoltaic Systems By De Groote, Olivier; Verboven, Frank
  5. Consumer choice under limited attention when options have different information costs By Frank Huettner,; Tamer Boyacı,; Yalçın Akçay

  1. By: Philippe Le Coent; Raphaelle Préget; Sophie Thoyer
    Abstract: In the economic literature on the motivations underlying voluntary contributions to environmental public goods, little attention is granted to the way the overall objective of the environmental program is framed. A program which contributes to an increase of environmental quality can be perceived differently from a program designed to bring back the environmental quality to its original level, after it was damaged by human intervention, even if net environmental gain is equivalent in both programs. How does it impact participation rates and contribution levels? This paper addresses this issue in the context of agri-environmental contracts for biodiversity conservation. It compares farmers’ willingness to participate in two equivalent agri-environmental schemes, one being framed as part of a biodiversity offset program, the other one as a biodiversity conservation program. We demonstrate with a discrete choice experiment that biodiversity –offsets programs must offer a greater payment to enroll farmers compared to the latter. This is explained by the sensitivity of farmers to environmental issues.
    Date: 2016–08
  2. By: de Vos, Gunther; Kragt, Marit E; Pandit, Ram
    Abstract: This work was undertaken to fulfil the requirements for Mr. de Vos’ Master degree in Environmental Science (Environmental Management) at the University of Western Australia. His supervisors were Dr Marit Kragt (UWA) and Dr Ram Pandit (UWA)
    Keywords: Conservation, Choice Modelling, Public Preferences, Urban Greenery, Western Australia, Wildlife Management, Environmental Economics and Policy, Q28, Q51, Q57,
    Date: 2016–08–25
  3. By: Lunn, Pete; Bohacek, Marek; McGowan, Feidhlim
    Abstract: We present a novel experimental method for investigating consumer choice. The Surplus Identification (S-ID) task is inspired by studies of detection in perceptual psychophysics. It employs a forced-choice procedure, in which participants must decide whether a novel product is worth more or less than the price at which it is being offered, that is, whether there is a positive or negative surplus. The SI-D task reveals how precision, bias and learning vary across attribute and price structures. We illustrate its use by testing for cognitive capacity constraints in multi-attribute choice in three separate experiments, with implications for models of bounded rationality and rational inattention. As the number of product attributes rises from one to four in the S-ID task (Experiment 1), participants cannot integrate additional information efficiently and they display systematic, persistent biases, despite incentivised opportunities to learn. Experiment 2 demonstrates how the S-ID task can be used to track learning and serves as a robustness check for the findings of Experiment 1. Experiment 3 adapts the S-ID task to test accuracy of surplus identification when multiple attributes are perfectly correlated. The S-ID task also has the potential to test multiple aspects of consumer choice models and to test specific hypotheses about the cognitive mechanisms behind surplus identification.
    Date: 2016–07
  4. By: De Groote, Olivier; Verboven, Frank
    Abstract: Many countries have relied on subsidies to promote the adoption of renewable energy technologies. We study a generous program to promote the adoption of solar photovoltaic (PV) systems through subsidies on future electricity production, rather than through upfront investment subsidies. We develop and estimate a tractable dynamic model of technology adoption, also accounting for local market heterogeneity. We exploit rich variation at pre-announced dates in the future production subsidies. Although the program led to a massive adoption, we find that households significantly undervalued the future benefits from the new technology. This implies that an upfront investment subsidy program would have promoted the technology at a much lower budgetary cost, so that the government essentially shifted the subsidy burden to future generations of electricity consumers.
    Keywords: dynamic discrete choice; myopia; renewable energy technologies
    JEL: C51 Q48 Q58
    Date: 2016–08
  5. By: Frank Huettner, (ESMT European School of Management and Technology); Tamer Boyacı, (ESMT European School of Management and Technology); Yalçın Akçay (College of Administrative Sciences and Economics, Koç University)
    Abstract: Consumers often do not have complete information about the choices they face and therefore have to spend time and effort in acquiring information. Since information acquisition is costly, consumers have to trade-off the value of better information against its cost, and make their final choices based on imperfect information. We model this decision using the rational inattention approach and describe the rationally inattentive consumer’s choice behavior when she faces options with different information costs. To this end, we introduce an information cost function that distinguishes between direct and inferential information. We then analytically characterize the optimal behavior and derive the choice probabilities in closed-form. We find that non-uniform information costs can have a strong impact on product choice, which gets particularly conspicuous when the product alternatives are otherwise very similar. It can also lead to situations where it is disadvantageous for the seller to provide easier access to information for a particular product. Furthermore, it provides a new explanation for strong failure of regularity of consumer behaviour, which occurs if the addition of an inferior – never chosen – product to the choice set increases the market share of another existing product.
    Keywords: discrete choice, rational inattention, information acquisition, non-uniform information costs, strong failure of regularity
    Date: 2016–08–18

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