nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2017‒10‒08
five papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Nonseparable Multinomial Choice Models in Cross-Section and Panel Data By Victor Chernozhukov; Iv\'an Fern\'andez-Val; Whitney Newey
  2. Merger Effects with Product Complementarity: Evidence from Colombia’s Telecommunications By Juan Vélez
  3. Time Discounting, Ambiguity Aversion, and Preferences for Future Environmental Policies: Evidence from Discrete Choice Experiments By Kenjiro Hirata; Shinsuke Ikeda; Masako Ikefuji; Myong-Il Kang; Katsunori Yamada
  4. "Vulnerability and Willingness to Pay for Coping with Flood in Klaten Regency, Central Java, Indonesia" By Suryanto
  5. "Are Tourists Willing to Pay for Mitigation of Abrasion? A study on Coastal Areas in Yogyakarta, Indonesia" By Evi Gravitiani

  1. By: Victor Chernozhukov; Iv\'an Fern\'andez-Val; Whitney Newey
    Abstract: Multinomial choice models are fundamental for empirical modeling of economic choices among discrete alternatives. We analyze identification of binary and multinomial choice models when the choice utilities are nonseparable in observed attributes and multidimensional unobserved heterogeneity with cross-section and panel data. We show that derivatives of choice probabilities with respect to continuous attributes are weighted averages of utility derivatives in cross-section models with exogenous heterogeneity. In the special case of random coefficient models with an independent additive effect, we further characterize that the probability derivative at zero is proportional to the population mean of the coefficients. We extend the identification results to models with endogenous heterogeneity using either a control function or panel data. In time stationary panel models with two periods, we find that differences over time of derivatives of choice probabilities identify utility derivatives "on the diagonal," i.e. when the observed attributes take the same values in the two periods. We also show that time stationarity does not identify structural derivatives "off the diagonal" both in continuous and multinomial choice panel models.
    Date: 2017–06
  2. By: Juan Vélez (Banco de la República de Colombia)
    Abstract: Mergers of firms producing complementary products have ambiguous effects on consumer welfare. Consumers benefit if the firm, motivated by the internalized profits created by the complementarity, lowers prices. Consumers are hurt if the firm uses bundles to exert price discrimination, making standalone products more expensive. To assess which effect dominates, I use an administrative dataset, which records prices, market shares, and plan attributes of the universe of Colombia’s telecom carriers. I estimate a random coefficients discrete choice model of demand for bundled and standalone telecom products, in which the degree of substitutability or complementarity among products is an essential parameter of interest. I find that major telecom products display a mix of substitutability and complementarity, but in general hardwired and mobile services are complements. Counterfactual experiments using the estimated model indicate positive net effects of mergers with complements: despite a small increase in the price of standalone goods, consumer surplus increased by around 11 million dollars per quarter after the Claro merger. On the other hand I find evidence that mergers between ISPs and mobile carriers reduce the likelihood of poorer households adopting faster broadband. Classification JEL: L22, L13, G34, L96.
    Keywords: Market Structure, Imperfect Competition, Mergers, Telecommunications
    Date: 2017–10
  3. By: Kenjiro Hirata; Shinsuke Ikeda; Masako Ikefuji; Myong-Il Kang; Katsunori Yamada
    Abstract: Designing efficient environmental policies requires knowledge about households' preference parameters for their intertemporal decisions. By conducting an original Internet-based survey using Japanese participants (n=2,906) and a follow-up survey (n=1,407), we examine how people evaluate pro-environmental policies depending on their individual attributes. The discount rates for environmental outcomes are estimated by using a discrete choice experiment. We show that participants' discount rates in environmental policy choices are on average negative and future-biased. Those who are more ambiguity-averse and patient for money concerns, and anticipate more rapid increases in future temperatures are more willing to incur present-day tax burdens to ensure future environmental improvements. These results are highly robust against alternative estimation models and stable when using the follow-up survey data obtained 21 months later.
    Date: 2017–09
  4. By: Suryanto (The Faculty of Economics and Business, Universitas Sebelas Maret, Indonesia. Author-2-Name: Sutrisno Author-2-Workplace-Name: The Faculty of Economics and Business, Universitas Sebelas Maret, Indonesia. Author-3-Name: Evi Gravitiani Author-3-Workplace-Name: The Faculty of Economics and Business, Universitas Sebelas Maret, Indonesia. Author-4-Name: Fitri Susilowati Author-4-Workplace-Name: The Faculty of Economics, Universitas PGRI Yogyakarta, Indonesia)
    Abstract: "Objective – The focus of this research is the analysis of vulnerability and factors that influence willingness to pay (WTP) to cope with flood. Other result of this research is economic valuation of flood impact on paddy field in particular. Methodology/Technique – This research used the descriptive and quantitative method. Its data were collected through direct interviews with 380 respondents. Its samples were scattered in 11 sub-districts and 94 villages. The representatives of each village were 4 respondents, by adding two respondents from Wedi Sub-district and 2 respondents from Cawas Sub-district. Proportional sampling technique was employed to determine the research samples with criteria: very close ( 100 m) from the river. Its data were analyzed by using contingent valuation methods (CVM). Findings – The results of the research are as follows. Many activities have been implemented to mitigate flood in Klaten Regency, but many problems have been encountered due to the limitations of Government Budget (APBD). The variables of income of family/household, water level, distance, and loss have a significant effect on the WTP. In majority, the respondents (72.27%) have the WTP for flood mitigation activities with the average WTP of 15,391 IDR. Novelty – Economic valuation of flood mitigation programs and activities is required as to further enhance the role of the community, taking into account factors affecting the WTP. The local government should take advantage of the public's WTP to support flood mitigation activities among neighbourhood, village, sub-district and regency."
    Keywords: Vulnerability; Flood Mitigation; Contingent Valuation; Willingness to Pay (WTP).
    JEL: D12 H84
    Date: 2017–03–16
  5. By: Evi Gravitiani (Faculty of Economics and Business, Universitas Seblas Maret, Surakarta, Indonesia Author-2-Name: Mugi Rahardjo Author-2-Workplace-Name: Faculty of Economics and Business, Universitas Sebelas Maret, Indonesia Author-3-Name: Norma Sagita Pratiwi Author-3-Workplace-Name: Faculty of Economics and Business, Universitas Sebelas Maret, Indonesia)
    Abstract: "Objective – Climate change has an impact on not only environmental problems, but also on socio-economic communities. Indonesia as an archipelago country has the second longest coastline after Canada. Indonesia has a high vulnerability to climate change, especially rising sea levels which can cause abrasion. Public awareness is needed to preserve the coastal area, to prevent potential disasters that may occur. Consequently, it is important to analyze the determinant factors of tourist’s willingness to pay (‘WTP’) for mitigation of abrasion and how much it would cost. This study also estimates how the relationship between a tourist’s WTP and abrasion on coasts in Yogyakarta. Methodology/Technique – A multiple linear regression method is used to estimate the determinant factors of a tourist’s WTP. The location of this study is on Kuwaru Beach and Pandansimo Beach in Bantul Regency, which have several indicators of the possibility of abrasions. Two hundred respondents were interviewed regarding the influence of socioeconomy and other factors to tourist’s WTP. Findings – That result is equivalent with the level of abrasion for each beach. Variables of education and income have significant effects on tourist’ WTP at Kuwaru Beach. While in Pandansimo Beach, age and education have significant effect on WTP. The average tourist’s WTP for mitigation in Kuwaru beach and Pandansimo beach at Yogyakarta are Rp 81,150.00 and Rp 62,250.00. Novelty – Mitigation on abrasion calls for community awareness amongst local citizens, tourists, and people who conduct business along the beach. For the two beaches studied, the variables used – sex ratio, age, education and income – have a significant effect on a tourists’ willingness to pay for abrasion mitigation."
    Keywords: Coastal Abrasion; Mitigation; Tourist; Willingness to Pay; Indonesia.
    JEL: Q25 R11
    Date: 2017–04–19

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