nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2017‒07‒02
nine papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Unordered Monotonicity By James J. Heckman; Rodrigo Pinto
  2. Airport, airline and departure time choice and substitution patterns: An empirical analysis By Escobari, Diego
  3. Objectives’ alignment between members and agricultural cooperatives By François Bareille; Florence Bonnet-Beaugrand; Sabine Duvaleix-Treguer
  4. PRIORITIZING MANAGEMENT FOCUS AREAS FOR COMMERCIAL FARMS By Jacqueline Holland; Nicole Widmar; David Widmar; Michael Gunderson; David Ortega
  5. Foundations of Welfare Economics and Product Market Applications By Daniel McFadden
  6. Farm heterogeneity and agricultural policy impacts on size dynamics: evidence from France By Legrand D. F, Saint-Cyr
  7. The effect of Affirmative Action on the reduction of employment discrimination, 1997-2015 By Fadwah Fredericks; Derek Yu
  8. Modeling Qualitative Outcomes by Supplementing Participant Data with General Population Data: A Calibrated Qualitative Response Estimation Approach By Erard, Brian
  9. Airport Noise in Atlanta: The Inequality of Sound By Cohen, Jeffrey P.; Coughlin, Cletus C.; Crews, Jonas C.

  1. By: James J. Heckman; Rodrigo Pinto
    Abstract: This paper presents a new monotonicity condition for unordered discrete choice models with multiple treatments. Unlike a less general version of mono-tonicity in binary and ordered choice models, monotonicity in unordered discrete choice models along with other standard assumptions does not necessarily identify causal effects defined by variation in instruments, although in some cases it does. Our condition implies and is implied by additive separability of the choice equations in terms of observables and unobservables. These results follow from properties of binary matrices developed in this paper. We investigate conditions under which Unordered Monotonicity arises as a consequence of choice behavior. We represent IV estimators of counterfactuals as solutions to discrete mixture problems.
    JEL: C16 C93 I21 J15
    Date: 2017–06
  2. By: Escobari, Diego
    Abstract: This paper uses the random-coefficients logit methodology that controls for potential endogeneity of prices and allows for general substitution patterns to estimate various demand systems. The estimation takes advantage of an original ticket-level revealed preference data set on travels from the New York City area to Toronto that contains prices and characteristics of not only flight choices but also of all non-booked alternative flights. Consistent with having higher valuations, our results show that travelers buying closer to departure have a higher utility of flying. Moreover, consumers' heterogeneity decreases as the flight date nears. At the carrier level, we identify which carriers have more price-sensitive consumers and which carriers face greater competition. In addition, the results suggest that our multi-airport metropolitan area can be considered as a single market and that JFK and Newark are relatively closer substitutes. Overall, consumers are more willing to switch to alternative carriers than between airports or departure times.
    Keywords: Airline choice; Airport choice; Departure time choice; Substitution patterns; Airline demand; Elasticities
    JEL: C33 C36 D12 D40 L93 R41
    Date: 2017–06–12
  3. By: François Bareille; Florence Bonnet-Beaugrand; Sabine Duvaleix-Treguer
    Abstract: Members’ commitment lessens when agricultural cooperatives grow larger. Their organization becomes more complex and their membership more heterogeneous, which threatens their sustainability and leads them to implement specific mechanisms for collective decisions. We explore how the alignment of objectives between a multi-purpose cooperative and its members influences member commitment. We estimate a multinomial probit model on a cross-section sample of 3,205 members from a large agricultural cooperative in France. We assess the determinants of member commitment through four factors: the offer of new agricultural practices, the availability of outlets and supplies to members, the farm distance to the cooperative headquarters and the farm governance. We show that the adoption of new agricultural practices has a small but significant effect. The availability of outlets and supplies has the strongest effect on the economic involvement of the farmers. Other determinants, such as farm governance or geographical distance to the cooperative headquarters, also reinforce member commitment.
    Keywords: agricultural cooperatives, member commitment, farm innovation, economic involvement
    JEL: Q13 C35
    Date: 2017
  4. By: Jacqueline Holland; Nicole Widmar; David Widmar; Michael Gunderson (Department of Agricultural Economics, College of Agriculture, Purdue University, W. Lafayette, IN); David Ortega (Department of Agricultural, Food, and Resource Economics, Michigan State University, East Lansing, MI)
    Abstract: Farm management is a series of complex processes incorporating a variety of dynamic factors, including biological production systems, resource allocation and management, and the management of increasingly complex financial and economic systems. Farm managers are constantly required to prioritize and allocate management effort and attention amongst these factors and evaluate tradeoffs. This analysis elicited from commercial producers the relative ranking of five critical farm management focus areas, namely, managing production; managing land, equipment, and facilities; controlling costs; managing output prices; and managing people. Out of a total of 2,247 commercial farms in this study, the largest mean shares of importance were placed on controlling costs (28.6%) and managing production (27.3%). Producers, on average, emphasized the management areas of controlling costs and managing production, relative to managing land, equipment, and facilities; managing people; and managing output prices, for farm success. Correlations between the farm management focus areas studied were estimated from producer-specific share of importance estimates resulting from a random parameters logit model; the strongest correlation observed was the negative relationship between managing production and controlling costs. Implications for self-identified success factors, or critical areas of management focus, of commercial farms are far reaching, potentially influencing sales, marketing, and decision support for these operations, as well as driving research and programmatic focus to provide relevant information to these producers moving forward
    Keywords: farm management;on-farm decision making;producer preferences
    JEL: Q10 Q12 Q13
    Date: 2016
  5. By: Daniel McFadden
    Abstract: A common problem in applied economics is to determine the impact on consumers of changes in prices and attributes of marketed products as a consequence of policy changes. Examples are prospective regulation of product safety and reliability, or retrospective compensation for harm from defective products or misrepresentation of product features. This paper reexamines the foundations of welfare analysis for these applications. We consider discrete product choice, and develop practical formulas that apply when discrete product demands are characterized by mixed multinomial logit models and policy changes affect hedonic attributes of products in addition to price. We show that for applications that are retrospective, or are prospective but compensating transfers are hypothetical rather than fulfilled, a Market Compensating Equivalent measure that updates Marshallian consumer surplus is more appropriate than Hicksian compensating or equivalent variations. We identify the welfare questions that can be answered in the presence of partial observability on the preferences of individual consumers. We examine the welfare calculus when the experienced-utility of consumers differs from the decision-utility that determines market demands, as the result of resolution of contingencies regarding attributes of products and interactions with consumer needs, or as the result of inconsistencies in tastes and incomplete optimizing behavior. We conclude with an illustrative application that calculates the welfare impacts of unauthorized sharing of consumer information by video streaming services.
    JEL: D11 D12 D60 D61 K13 L51
    Date: 2017–06
  6. By: Legrand D. F, Saint-Cyr
    Abstract: This article investigates the impact of agricultural policies on structural change in farming. Since not all farmers may behave alike, a non-stationary mixed-Markov chain modeling (M-MCM) approach is applied to capture unobserved heterogeneity in the transition process of farms. A multinomial logit specification is used for transition probabilities and the parameters are estimated by the maximum likelihood method and the Expectation-Maximization (EM) algorithm. An empirical application to an unbalanced panel dataset from 2000 to 2013 shows that French farming mainly consists of a mixture of two farm types characterized by specific transition processes. The main finding is that the impact of farm subsidies from both pillars of the Common Agricultural Policy (CAP) highly depends on the farm type. A comparison between the non-stationary M-MCM and a homogeneous non-stationary MCM shows that the latter model leads to either overestimation or underestimation of the impact of agricultural policy on change in farm size. This suggests that more attention should be paid to both observed and unobserved farm heterogeneity in assessing the impact of agricultural policy on structural change in farming.
    Keywords: agricultural policy, EM algorithm, farm structural change, mixed-Markov chain model, multinomial logit, unobserved heterogeneity
    JEL: Q12 Q18 C38 C51
    Date: 2017
  7. By: Fadwah Fredericks; Derek Yu
    Abstract: This study examines the effect of Affirmative Action on the reduction of employment discrimination by race and gender, more than 20 years since the economic transition. The empirical part of the paper employs a sample that represents the labour force (excluding informal sector workers, agricultural workers, domestic workers, self-employed and employers) aged between 15 and 65 years. The study estimates probit models to examine labour force participation, employment and occupational attainment likelihoods, followed by the Oaxaca-Blinder decomposition, using labour survey data in 1997-2015. The decomposition results show that the unexplained component of the White-African employment probability gap reveals a slight downward trend in absolute terms in 2002-2011 but in relative terms it still accounts for more than 50% of the gap. On the other hand, the unexplained component is most dominant in the male-female employment gap decomposition. These results suggest that employment discrimination against Africans and females remains serious.
    Keywords: Affirmative Action, labour market discrimination, employment discrimination, Oaxaca-Blinder Decomposition, South African banking
    JEL: J00
    Date: 2017–05
  8. By: Erard, Brian
    Abstract: Often providers of a program or a service have detailed information about their clients, but only very limited information about potential clients. Likewise, ecologists frequently have extensive knowledge regarding habitats where a given animal or plant species is known to be present, but they lack comparable information on habitats where they are certain not to be present. In epidemiology, comprehensive information is routinely collected about patients who have been diagnosed with a given disease; however, commensurate information may not be available for individuals who are known to be free of the disease. While it may be highly beneficial to learn about the determinants of participation (in a program or service) or presence (in a habitat or of a disease), the lack of a comparable sample of observations on subjects that are not participants (or that are non-present) precludes the application of standard qualitative response models, such as logit or probit. In this paper, we present some new qualitative response estimators that can be applied by combining information from a primary sample of participants with a general sample from the overall population. Our new estimators rival the best existing estimators for use control sampling. Furthermore, these new estimators can be applied to stratified samples even when the stratification criteria are unknown. The estimators are also readily generalized to accommodate polychotomous response problems. Modeling Qualitative Outcomes by Supplementing Participant Data with General Population Data: A Calibrated Qualitative Response Estimation Approach. Available from: [accessed Jun 28, 2017].
    Keywords: Qualitative response, Probit, Logit, Case Control Sampling, Use Control Sampling, Presence Pseudo-Absence Sampling, Contaminated Controls, Supplementary Sampling, Prevalence, Take-Up, Habitat Selection
    JEL: C1 C13 C18 C4 C51
    Date: 2017–06–24
  9. By: Cohen, Jeffrey P. (University of Connecticut); Coughlin, Cletus C. (Federal Reserve Bank of St. Louis); Crews, Jonas C. (Federal Reserve Bank of St. Louis)
    Abstract: We examine how changes in the geographic concentrations of Hispanic and African-American populations are correlated with changes in probabilities of airport noise, in Atlanta, during 2003 and 2012. We estimate ordered probit and locally weighted ordered probit regressions for three different noise categories to determine the correlations between these two demographic groups and the aircraft noise levels experienced by people in individual houses that sold. Then we determine the average coefficient for all houses sold in each Census block group, and we plot each year’s coefficients for each block group against the percentiles of the minority population. While the absolute level of noise has declined over the geographic area considered in 2012 compared with 2003, we find that the distribution of noise coefficients among Hispanics and blacks became more inequitable in 2012 compared with 2003. At least two potential mechanisms could generate these correlations. Due to residential mobility, income and preferences could combine to produce a concentration of minorities in certain neighborhoods. Or, perhaps noisier flight paths are imposed upon higher minority neighborhoods as a result of discrimination. Our findings contribute to the broader literature on environmental justice, even though we cannot definitively infer the mechanisms at work.
    Keywords: Airport Noise; Spatial Heterogeneity; Environmental Justice; Ordered Probit; Locally Weighted Regression
    JEL: C25 Q53 R41
    Date: 2017–06–26

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