nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2017‒03‒19
six papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Consumer state dependence, switching costs, and forward-looking producers. A dynamic discrete choice model applied to the diaper market By Rickert, Dennis
  3. Stated Preferences for Conservation Policies under Uncertainty: Insights on Individuals’ Risk Attitudes in the Environmental Domain By Michela Faccioli; Laure Kuhfuss; Mikołaj Czajkowski
  4. The Cost of Greening Stimulus: A Dynamic Discrete Choice Analysis of Vehicle Scrappage Programs By Shanjun Li; Chao Wei
  5. Inference of Choice Sets: Application to Grocery Retailing By Lu, Anna
  6. Determinantes del Desempleo en la República Dominicana: Dinámica Temporal y Microsimulaciones By Ramírez, Nerys F.

  1. By: Rickert, Dennis
    Abstract: This study estimates a dynamic discrete choice model to analyze the effect of switching costs on firm market power. Given the presence of switching costs for consumers in the market for disposable diapers, I show how firms apply dynamic strategies to a market for differentiated products and in a context of vertical retailer-manufacturer relationships. My findings support the existence of state dependence in consumer demand. Furthermore, I show that the firm profits would be higher in a counterfactual scenario of no switching costs.
    JEL: L10 L20 L60
    Date: 2016
  2. By: Costanigro, Marco; Scozzafava, Gabriele; Casini, Leonardo
    Abstract: We conduct a choice experiment where the number of labels vertically differentiating Chianti wines (Chianti, Chianti Classico, Chianti Classico Riserva, Chianti Classico Gran Selezione) is augmented incrementally in a between-subject design, eliciting both quality perceptions and wine choices. We find that quality expectations are endogenous to the labeling regime, and adding a high-quality label (e.g., Chianti Gran Selezione) decreases the perceived quality of all other Chianti wines (comparative stigma). A model conditioning on subjective quality perceptions with heterogeneous WTP for quality is then proposed, and estimated via random parameter multinomial logit. The endogeneity problem arising from using subjective beliefs as regressors is addressed by means of a control-function approach. Results are compared to reduced form approaches where the marginal utility of quality and subjective perceptions are confounded in a single label-specific estimate, and the model is used to determine how much of the cannibalization observed after introducing higher-tier quality standards is attributable to restructuring of perceptions and comparative stigma.
    Keywords: Industrial Organization, Marketing,
    Date: 2017–02
  3. By: Michela Faccioli (The James Hutton Institute, Social, Economic and Geographical Sciences Group); Laure Kuhfuss (The James Hutton Institute, Social, Economic and Geographical Sciences Group; University of St. Andrews, Department of Geography and Sustainable Development); Mikołaj Czajkowski (Faculty of Economic Sciences, University of Warsaw)
    Abstract: The outcome of a conservation policy is often subject to uncertainty. In stated preference valuation, there is increasing recognition that uncertainty affects preferences for environmental policies. However, there is also poor understanding regarding people’s perception of uncertainty per se and risk attitude. To shed more light on this, we designed a discrete choice experiment and compared preferences for environmental outcomes under climate change across two split samples, each confronted with a scenario where environmental outcomes are presented as either certain or uncertain (i.e. probabilistically) but displaying the same expected results. We find that, for an equal expected outcome, preferences vary between the certain and the uncertain treatment. These results indicate that risk attitudes impact stated preferences for conservation policies under uncertainty and reinforce the idea that uncertainty should be included in stated preference studies to provide more accurate and policy relevant results. Interestingly, we additionally find that risk attitudes appear to be both context- and individual- specific – the effect of uncertainty depends on the magnitude and direction of change of the environmental good and on individual’s socio-demographic characteristics.
    Keywords: Stated preference valuation; uncertainty; risk attitude; climate change; conservation
    JEL: D6 D81 Q20 Q51 Q54
    Date: 2017
  4. By: Shanjun Li (Cornell University); Chao Wei (George Washington University)
    Abstract: During the recent economic crisis, many countries have adopted stimulus programs designed to achieve two goals: to stimulate economic activity in lagging durable goods sectors and to protect or even enhance environmental quality. The environmental bene ts are often viewed and much advocated as co-bene ts of economic stimulus. This paper investigates the potential tradeo between the stimulus and environmental objectives in the context of the popular U.S. Cash-for-Clunkers (CFC) program by developing and estimating a dynamic discrete choice model of vehicle ownership. Results from counterfactual analysis show that design elements to achieve environmental bene ts could signi cantly limit the program impact on demand stimulus: the cost of demand stimulus after netting out environmental bene ts under the program could be 43 percent higher in terms of vehicle sales and 38 percent higher in terms of consumer spending than that from alternative policy designs without explicitly aiming at the environmental objective.
    Keywords: Stimulus, Discrete Choice Model, Vehicle Scrappage
    JEL: E62 H23 H31
    Date: 2016
  5. By: Lu, Anna
    Abstract: In the empirical literature on grocery retailing it is typically assumed that all consumers choose from the full set of products in the market. We develop an approach to formally test this assumption. Our test can be applied to individual-level purchase data. Unlike previous approaches it does not require stated data on choice sets; instead, it relies on only widely available cost shifter data. We show an application to the German retail market for milk and find that the model of homogeneous, full choice sets is outperformed by a model in which consumers consider only the products of the retailer they are currently shopping in.
    JEL: L00 D12 L13
    Date: 2016
  6. By: Ramírez, Nerys F.
    Abstract: The present paper studies the dynamics of unemployment determinants and their influence on aggregate well-being, using micro-data from the ENFT and a Logit model combined with micro-simulation techniques. The results confirm that the unemployment probability of the economically active people is determined by their particular characteristics (gender, age, geographical location, schooling, income, among others) and their domestic and work environment, although the effect of these conditions differs in function of their gender, life cycle, territory and the current economic context. On the supply side, there is an important segmentation of the labor market, which, according to the microsimulations, prevents a vulnerable population from taking advantage of the expansive movements of the labor market and makes them prone to unemployment in recessive conjunctures. Estimates indicate that women and young people face greater probabilities of unemployment and sensitivity to the economic cycle, especially when they come from lower income households, dragging these conditions throughout their life cycle, although with age reduces the propensity to unemployment; In addition, show that schooling affects simultaneously labor participation and the probability of unemployment, observing higher schooling, higher labor participation and lower probabilities of unemployment, although it is shown that higher schooling promotes some propensity to unemployment, derived from higher wage expectations and Market imbalances; Geographically, estimates find territorial divergences and evidence in favor of the unemployment hypothesis as an urban phenomenon; With respect to the domestic environment, identify an important "intergenerational" effect derived from the conditions of the household head, and show that individual domestic responsibilities affect asymmetrically from the sex of the people, promoting that women face greater difficulties in reconciling them with the job. On the demand side, they show that people in the primary sector face greater probabilities of unemployment, which promotes their intersectoral displacement; While the incidence of informality in the propensity to unemployment was shown to affect women more significantly, although their effect on the territory differed.
    Keywords: Mercado laboral, Desempleo, Logit, Microsimulaciones, Pobreza
    JEL: C01 C25 C81 E24 J08 J64
    Date: 2016–07

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