nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2017‒10‒15
four papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Should Flavors be Banned in E-cigarettes? Evidence on Adult Smokers and Recent Quitters from a Discrete Choice Experiment By John Buckell; Joachim Marti; Jody L. Sindelar
  2. Preference updating in public health risk valuation By Mehmet Kutluay; Roy Brouwer; Richard S. J. Tol
  3. Invariance Axioms and Functional Form Restrictions in Structural Models By Dagsvik, John K
  4. The interconnections between services and goods trade at the firm-level By Andrea Ariu; Holger Breinlich; Gregory Corcos; Giordano Mion

  1. By: John Buckell; Joachim Marti; Jody L. Sindelar
    Abstract: E-cigarettes are available in over 7,000 flavors, whereas all flavors but menthol are banned in combustible cigarettes. The FDA recently requested a ban on e-cigarette flavors, but was rejected. The FDA is again considering this ban and also a ban on menthol in combustible cigarettes, but there is little information on the impacts of alternative bans on the market for combustible and e-cigarettes. Our study provides these much-needed estimates. We conduct a discrete choice experiment on a nationally representative sample of 2,031 adult smokers and recent quitters that we collected. We estimate preferences for flavors and other attributes and use these preferences to predict the demand for each cigarette type and for “none of these.” We then predict the impact of alternative bans and compare results for the current treatment of flavors to results for the alternative bans. We find that the recently denied FDA ban would result in increased choice of combustible cigarettes, the most harmful alternative. However, a ban on menthol in combustibles would result in the greatest reduction in smoking of combustibles. Our results are timely and policy-relevant, suggesting which flavor bans are likely to be most effective in protecting public health.
    JEL: C35 I12 I18
    Date: 2017–09
  2. By: Mehmet Kutluay (Institute for Environmental Studies, Vrije Universiteit, Amsterdam; Tinbergen Institute, Amsterdam/Rotterdam); Roy Brouwer (Department of Economics and The Water Institute, University of Waterloo, Canada; Institute for Environmental Studies, Vrije Universiteit, Amsterdam); Richard S. J. Tol (Institution Department of Economics, University of Sussex; Institute for Environmental Studies, Vrije Universiteit, Amsterdam; Department of Spatial Economics, Vrije Universiteit, Amsterdam; Tinbergen Institute, Amsterdam; CESifo, Munich)
    Abstract: Willingness to pay (WTP) for malaria pills, in light of new risk information and probability weighting, is estimated via a discrete choice experiment (CE). A lottery played prior to the CE yields individual-level probability weighting parameters through Bayesian inference. Over-reaction to new malaria risk information is found as marginal WTP for malaria protection increases by 20-33%. The probability weighting parameter helps to explain the observed variation in malaria valuation, while over or under-weighting of probabilities is found to be correlated with malaria knowledge and experience. This is independent of whether or not the information treatment is received. Over-reaction to new information uncovers potential biases, possibly from simply reminding people about being sick, in placing a monetary value on avoiding uncertain public health risks.
    Keywords: probability weighting, malaria, valuation, information shock, Bayesian inference
    JEL: D83 D90 I12 I18
    Date: 2017–10
  3. By: Dagsvik, John K (SSB)
    Abstract: The dominant practice in economics is to choose the mathematical specification of model relations on the basis of convenience, without much theoretical support. This paper discusses how quantitative model specifications can, in some cases, be given a more formal scientific underpinning in the sense of being based on a priori theory. I use an example from discrete choice theory to illustrate that it is sometimes possible to obtain a complete characterization of the choice model derived from a set of plausible axioms. Furthermore, I discuss how axioms can be tested non-parametrically, given that suitable Stated Preference data are available.
    Keywords: Functional form; Theory of measurement; Invariance principles; Independence from Irrelevant Alternatives; Testing of inequality hypotheses
    JEL: C40 C51 D12
    Date: 2017–08–30
  4. By: Andrea Ariu (Economics Department, LMU University Munich, Germany; IFO, Germany; CRENOS); Holger Breinlich (School of Economics, University of Nottingham, UK, CEP, UK and CEPR, UK); Gregory Corcos (CREST and Economics Department, Ecole polytechnique, France.); Giordano Mion (Department of Economics, University of Sussex, UK; CEP, UK; CEPR, UK and CESifo, Germany.)
    Abstract: In this paper we study how international trade in goods and services interact at the firm level. Using a rich dataset on Belgian firms during the period 1995-2005, we show that: i) firms are much more likely to source services and goods inputs from the same origin country rather than from different ones; ii) increases in barriers to imports of goods reduce firm-level imports of services from the same market, and conversely. We build upon a discrete-choice model of goods and services input sourcing that can reproduce these facts to design our econometric strategy. The results suggest that a liberalization of service trade has direct and sizable effects on goods trade and vice-versa. Moreover, sourcing goods and services from the same origin brings substantial complementarities to both.
    Keywords: Trade in Services; Trade in Goods; Complementarity; Firm-level Analysis; Discrete Choice Models.
    JEL: F10 F13 F14 L60 L80
    Date: 2017–10

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