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on Discrete Choice Models |
| By: | Fosgerau, Mogens; Melo, Emerson; Shum, Matt |
| Abstract: | This paper establishes a general equivalence between discrete choice and rational inattention models. We show that the choice probabilities emerging from any random utility discrete choice model can be obtained from a class of suitably generalized rational inattention models, and vice versa. Thus any discrete choice model can be given an interpretation in terms of boundedly rational behavior. The underlying idea is that the surplus function of a discrete choice model has a convex conjugate that is a generalized entropy (which is a suitable generalization of the Shannon entropy function). These generalized entropies are used to construct an information cost function for a generalized rational inattention model. We denote this class of rational inattention problems as Generalized Entropic Rational Inattention (GERI) models. |
| Keywords: | Rational Inattention; discrete choices; general entropy; con- vex analysis |
| JEL: | C25 D03 D81 E03 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:76605&r=dcm |
| By: | Adelina Gschwandtner; Michael Burton |
| Abstract: | There has been almost no recent formal economic analysis of the WTP of British consumers for organic products. Given the rising demand for organic products on one hand and the decline in the organically farmed area in the UK on the other hand, this is an important topic to address. The present paper analyses the demand for organic products using both stated and revealed preferences from exactly the same consumers. The stated preference model is based on the respondent’s choice from hypothetical choice sets. Attributes in the stated preference model are based on the ranges of the actual levels of attributes found in shops and are presented to respondents using a fractional factorial statistical design. Three different hypothetical bias treatments are applied in order to reduce hypothetical bias. The stated preference results are validated with the help of actual consumption data from the weekly shopping of the same consumers. The results show that there exists a core of organic consumers of about 20-30% of the sample that have a positive willingness to pay for the organic label. However, consumers seem to be willing to pay mor e for other attributes such as a higher quality, environmentally friendly production and no chemical usage. Attributes such as animal welfare, and a longer expiry date do not seem to have the same relevance for the UK consumers. |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:ukc:ukcedp:1702&r=dcm |
| By: | Vesterberg, Mattias (Department of Economics, Umeå University) |
| Abstract: | I explore how households switch between fixed-price and variable-price electricity contracts in response to variations in price and temperature, conditional on previous contract choice. Using panel data with roughly 54000 Swedish households, a dynamic probit model is estimated. The results suggest that the choice of contract exhibits substantial state dependence, with an estimated marginal effect of previous contract choice of 0:96, and that the short-run effects of variation in prices and temperature on the choice of electricity contract are small. Further, the state dependence and price responsiveness are similar across housing types, income levels and other dimensions. A plausible explanation of these results is that transaction costs are perceived to be larger than the relatively small cost savings from switching between contracts. |
| Keywords: | Electricity demand; electricity contract choice; demand flexibility |
| JEL: | D10 D12 Q41 Q48 |
| Date: | 2017–01–22 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:0941&r=dcm |
| By: | Galassi, Veronica (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)) |
| Abstract: | Energy retrofits of residential dwellings, ceteris paribus, result in a new socio-technical system characterized by higher room temperatures. In the new environment, individuals might change their type of interaction with the building and exert a certain level of effort to adapt to the new comfort situation depending on their previous practices. In this paper, by means of a Discrete Choice Experiment conducted among 3,161 tenants and owner-occupiers in Germany, we investigate preferences for practices implemented to adjust thermal comfort in retrofitted buildings, thus attempting to reconcile rational choice with social practice theories. We focus on effort and habits but our models also account for the type of control over the room temperature, adjustment time, and clothing. Our results show that in the presence of an obstruction, like potted plants or other decorative paraphernalia, in the proximity of the interaction point with the system, respondents dislike exerting effort to fully open the window but would still make the effort to switch off the heating system. Moreover, respondents with more environmentally-friendly heating and ventilation habits particularly dislike tilting the windows rather than opening them wide; however, after the retrofit they tend to prefer wearing lighter clothes at home. By quantitatively measuring the impact of each factor in the decision-making process, we contribute to the ongoing rebound debate in the energy economics and social psychology literature alike. |
| Keywords: | Social practice theory; Generalized mixed logit; Discrete choice experiment; Energy efficiency; Thermal comfort; Germany |
| JEL: | C25 C90 D12 Q40 R20 |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:ris:fcnwpa:2016_019&r=dcm |
| By: | Tebbe, Eva; von Blanckenburg, Korbinian |
| Abstract: | The environmental need for and economic opportunities provided by sustainability in food production are becoming increasingly popular in both society and research. Interacting with this, labels signaling sustainable product attributes are gaining importance, although uncertainty concerning the environmental, micro- and macroeconomic benefits of such labels persist. One of the questions still incompletely answered is whether consumers are willing to pay more for labeled than for unlabeled products and whether this willingness increases with the number of labels on a food product. To tackle this question, we conduct a laboratory experiment, testing consumer valuations of different labeling strategies. Using the Becker-deGroot-Marschak mechanism, consumer willingness to pay (WTP) for 15 food products is measured. The products were endowed with up to six different sustainability labels, such that each grocery item was available in eight product versions. 191 respondents were allocated to groups, of which each was confronted with a different set of product versions. In order to compare labeling schemes across all products, we calculated an aggregated standardized relativized WTP. The results indicate that participants are prone to allocating WTP premiums to labeled products, more than to unlabeled products. However, the premiums do not vary with an increasing number of labels, independent of whether the labels signal substitute or complementary sustainability information. Thus, the results are not entirely in line with normative notions of magnitude variation, but rather with behavioral economic concepts. |
| JEL: | L15 D12 D44 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145556&r=dcm |
| By: | Merritt, Meagan; Lewis, Karen; Griffith, Andrew; Jensen, Kimberly |
| Keywords: | Beef Cattle Attributes, Consumer Willingness to Pay, Choice Experiment, Consumer/Household Economics, Demand and Price Analysis, Marketing, Q10, Q13, |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea17:252674&r=dcm |
| By: | Andor, Mark; Gerster, Andreas; Sommer, Stephan |
| Abstract: | Energy labels have been introduced in many countries to increase consumers' attention to energy use in purchase decisions of durables. In a discrete-choice experiment among about 5,000 households, we implement randomized information treatments to explore how energy labels influence purchasing decisions. Our results show that adding annual operating cost information to the EU energy label promotes the choice of energy-efficient durables. In addition, we find that a majority of participants value efficiency classes beyond the economic value of the underlying energy use differences. Our results further indicate that displaying operating cost affects choices through two distinct channels: it increases the attention to operating cost and reduces the valuation of efficiency class differences. |
| Keywords: | environmental certification,discrete choice experiment,energy efficiency,energy-using durables |
| JEL: | D03 D12 D83 Q48 Q50 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:671&r=dcm |
| By: | Segovia, Michelle S.; Palma, Marco A.; Chavez, Daniel E. |
| Keywords: | Choice Experiments, Eye-Tracking, Consistency, Food Consumption/Nutrition/Food Safety, Institutional and Behavioral Economics, C91, C18, |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea17:252858&r=dcm |
| By: | Gautam, Tej K.; Paudel, Krishna P.; Guidry, Kurt M. |
| Abstract: | We conducted survey to collect information from Louisiana farmers to understand their concerns related to irrigation water quality and availability of sufficient water for crop irrigation. We used logistic models to estimate the willingness to pay (WTP) for irrigation water during critical crop growing periods. Variables affecting the participation in WTP are income, land holding size, risk aversion, and education. Our estimated results show that farmers with higher education are more likely to pay for irrigation water compared to farmers with high school and college degree. Age of the farmers, farm revenue, size of the rented land have negative effect on willingness to pay for irrigation water. The sizes of the owned land and risk aversion factor have positive effect on willingness to pay. |
| Keywords: | willingness to pay/Willingness to accept, water trading, irrigation technology, logit, soybean, Production Economics, Resource /Energy Economics and Policy, Q12, Q25, |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea17:252821&r=dcm |