nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2017‒02‒26
five papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. The relationship between perceived difficulty and randomness in discrete choice experiments: Investigating reasons for and consequences of difficulty By Tobias Börger; Oliver Frör; Sören Weiß
  2. Consumer Inattention and Decision Heuristics: The Causal Effects of Energy Label Elements By Andor, Mark; Gerster, Andreas; Sommer, Stephan
  3. The External Validity of Consequential Stated Preference Studies: a comment By David A. Comerford; Nick Hanley
  4. Adoption Costs of Financial Innovation: Evidence from Italian ATM Cards By Kim Huynh; Philipp Schmidt-Dengler; Gregor W. Smith; Angelika Welte
  5. Valoración económica de los bienes y servicios ecosistémicos del golfo de Tribugá - Colombia By Luis Carlos Pupo Garcia; Jairo Parada Corrales

  1. By: Tobias Börger (School of Geography and Sustainable Development, University of St. Andrews); Oliver Frör (Institute of Environmental Sciences, University of Koblenz-Landau, Germany); Sören Weiß (Institute of Environmental Sciences, University of Koblenz-Landau, Germany)
    Abstract: Discrete choice experiments to value environmental goods and services constitute a complex and demanding task for survey respondents. This study looks at the effect of perceived difficulty with the choice tasks on choice consistency and preferences. The choice data come from two parallel surveys valuing river management outcomes in Germany. Results show that perceived difficulty decreases response scale, an indicator of the relative weight of the explained over the random component of indirect utility of a choice alternative. The reasons for this effect have more to do with the design of the actual task in the choice experiment than with the content and topic of the valuation exercise. Results also show only a very limited effect on preferences and willingness to pay for aspects of river management. The proposed econometric strategy manages to effectively separate the effect of difficulty on inter-individual differences of preference and scale. Based on these results, we recommend (i) to rigorously test the attribute design to allow only meaningful trade-offs as perceived by respondents and (ii)to put greater emphasis on the explanation of the choice tasks.
    Keywords: Discrete choice experiment, scale heterogeneity, perceived difficulty, river management
    JEL: H4 Q25 Q51
    Date: 2017–02
  2. By: Andor, Mark; Gerster, Andreas; Sommer, Stephan
    Abstract: Energy labels have been introduced in many countries to make consumers more attentive to energy use in purchase decisions of durables. Despite their wide application, however, little is known about the effects of specific label designs. In this paper, we explore how energy labels can help to address inattention of consumers to energy efficiency. Our analysis is based on a (randomized controlled) discrete choice experiment among about 5,000 households in which we implement treatments that vary the label design. We find that supplementing the label with annual cost information increases attention to operating cost and promotes the choice of durables with higher energy efficiency. Moreover, simplifying the label has similar positive effects, most notably for individuals with low education. Finally, we show that a substantial share of individuals employ decision heuristics, focusing primarily on efficiency classes while neglecting more detailed information on energy consumption.
    JEL: D12 D83 Q48
    Date: 2016
  3. By: David A. Comerford (Division of Economics, University of Stirling); Nick Hanley (School of Geography and Sustainable Development, University of St. Andrews)
    Abstract: Mounting evidence suggests that Consequential Discrete Choice Experiments (CDCEs) are internally valid i.e. they elicit a de-facto revealed preference. This comment asks whether CDCEs are always externally valid. For instance, when it comes to existence values, policy makers require a valuation of the benefit that derives from passively experiencing the continued existence of a good, whereas CDCEs measure the value that derives from actively intervening to maintain or increase the supply of a good. We show that CDCEs will recommend suboptimal levels of Pigovian taxes and public goods provision. We suggest potential alternatives to CDCEs that future research should consider.
    Keywords: Cost Benefit Analysis; Stated Preference; Willingness-to-pay; Consequentiality; Act utility; Exogenous Goods; Preferences-over-actions; Preferences-over-outcomes
    JEL: B41 C83 D61 D62 H41 H43
    Date: 2017–02
  4. By: Kim Huynh; Philipp Schmidt-Dengler; Gregor W. Smith; Angelika Welte
    Abstract: The discrete choice to adopt a financial innovation affects a household’s exposure to inflation and transactions costs. We model this adoption decision as being subject to an unobserved cost. Estimating the cost requires a dynamic structural model, to which we apply a conditional choice simulation estimator. A novel feature of our method is that preference parameters are estimated separately, from the Euler equations of a shopping-time model, to aid statistical efficiency. We apply this method to study ATM card adoption in the Bank of Italy’s Survey of Household Income and Wealth. There, the implicit adoption cost is too large to be consistent with standard models of rational choice, even when sorted by age, cohort, education or region.
    Keywords: Bank notes, Econometric and statistical methods, Financial services
    JEL: E41 D14 C35
    Date: 2017
  5. By: Luis Carlos Pupo Garcia; Jairo Parada Corrales
    Abstract: Los experimentos de elección constituyen a una herramienta poderosa para la construcción de escenarios hipotéticos que permitan identificar la utilidad que les genera a los usuarios potenciales la utilización de los bienes y servicios ambientales. En el presente trabajo se identifica el valor que los turistas potenciales de las ciudades de Bogotá, Medellín y Cali les asignan a los atributos medio ambientales asociados con la pesca deportiva, los recorridos por manglar y el avistamiento de ballenas, actividades que se desarrollan en el golfo de Tribugá (Chocó). En el estudio se aplicaron dos métodos de estimación diferentes, obteniéndose dos medidas de valor económico: con base en el método de valoración contingente (VC) de $276.081.466 anual y por el método de experimentos de elección (EE) de $188.930.000 anual. La disponibilidad a pagar marginal promedio por visita que estarían dispuestos a realizar los visitantes es de $1.850 y $1.296 para VC y EE, respectivamente. Estos hallazgos resultan importantes, debido a que es la primera valoración realizada en esta región, la cual servirá de insumo para la elaboración de estrategias para la generación de ingresos como estrategia de sostenibilidad financiera de un área marina protegida. ****** Choice experiments are a powerful tool for building hypothetical scenarios identifying the utility of potential users provided by the use of environmental goods and services. This paper is aimed at calculating the value that potential tourists, from the cities of Bogotá, Medellin and Cali, assign to environmental attributes related to recreational fishing, mangrove tours and whale watching activities taking place in the Gulf of Tribugá-Chocó. In order to carry out this study, we applied two different estimation methods, The Contingent Valuation (CV) which generated an average annual Willingness to Pay (WTP) of $276.081.466 for potential visitors and the Choice Experiments method (CE) with an annual value of $188.930.000. The marginal average annual WTP per visit was of $ 1.850 and $ 1.296 for CV and CE, respectively. These results are important because they are part of the first estimated economic valuation in this region, which will also serve as inputs for the development of strategies for income generation as a strategy on financial sustainability of a marine protected area.
    Keywords: Experimentos de elección, valoración contingente, área marina protegida., Choice experiments, contingentvaluation, marine protected area.
    JEL: H23 H41 Q57 D71
    Date: 2015–09–01

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