nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2017‒12‒11
five papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Multinomial logit processes and preference discovery: inside and outside the black box By S. Cerreia-Vioglio; F. Maccheroni; M. Marinacci; A. Rustichini
  2. Fairness to dairy cows or fairness to farmers: What counts more in the preferences of conventional milk buyers for ethical attributes of milk? By Markova-Nenova, Nonka; Wätzold, Frank
  3. Modeling the Effects of Grade Retention in High School By Cockx, Bart; Picchio, Matteo; Baert, Stijn
  4. Incentivising Participation and Spatial Coordination in Payment for Ecosystem Service Schemes:Forest Disease Control Programs in Finland By Oleg Sheremet; Enni Ruokamo; Artti Juutinen; Rauli Svento; Nick Hanley
  5. Location of R&D abroad. An analysis on Global Cities By Davide Castellani; Katiuscia Lavoratori

  1. By: S. Cerreia-Vioglio; F. Maccheroni; M. Marinacci; A. Rustichini
    Abstract: We provide both an axiomatic and a neuropsychological characterization of the dependence of choice probabilities on time in the softmax (or Multinomial Logit Process) form where pt (a;A) is the probability that alternative a is selected from the set A of feasible alternatives if t is the time available to decide, u is a utility function on the set of all alternatives, and is an accuracy parameter on a set of time points. MLP is the most widely used model of preference discovery in all elds of decision making, from Quantal Response Equilibria to Discrete Choice Analysis, from Psychophysics and Neuroscience to Combinatorial Optimization. Our axiomatic characterization of soft-max permits to empirically test its descriptive validity and to better understand its conceptual underpinnings as a theory of agents rationality. Our neuropsychological foundation provides a computational model that may explain softmax emergence in human multi-alternative choice behavior and that naturally extends the dominant binary choice Drift Diffusion Model paradigm. Keywords: Discrete Choice Analysis, Drift Diffusion Model, Luce Model, Metropolis Algorithm, Multinomial Logit Model, Quantal Response Equilibrium
    Date: 2017
  2. By: Markova-Nenova, Nonka; Wätzold, Frank
    Abstract: We investigate the willingness-to-pay (WTP) of German conventional milk buyers for ethical attributes of milk production through a choice experiment. Respondents have the highest WTP for animal welfare – free-stall plus summer pasture – followed by biodiversity conservation, support for small, below-average-income farms, and regional milk production. Respondents also have a positive WTP to support all farms but only in combination with regional production. We further find a positive WTP to support small farms in combination with tethering. This implies animal-welfare concerns are somewhat counterbalanced by fairness aspects. Our insights may support developing labels for ethical aspects of milk production.
    Keywords: dairy production, ethical attributes, fairness, choice modelling, latent class model, biodiversity, grassland
    JEL: Q13 Q18 Q5 Q51 Q57
    Date: 2017–12–01
  3. By: Cockx, Bart; Picchio, Matteo; Baert, Stijn
    Abstract: A dynamic discrete choice model is set up to estimate the effects of grade retention in high school, both in the short-run (end-of-year evaluation) and in the long-run (drop-out and delay). In contrast to other evaluation approaches, this model captures essential treatment heterogeneity and controls for grade-varying unobservable determinants. In addition, forced track downgrading is considered as an alternative remedial measure. Our results indicate that grade retention has a neutral effect on academic achievement in the short-run. In the long-run, grade retention, just like forced downgrading, has adverse effects on schooling outcomes and, more so, for less able pupils.
    Keywords: Education,grade retention,track mobility,dynamic discrete choice models,heterogeneous treatment effects
    JEL: C33 C35 I21
    Date: 2017
  4. By: Oleg Sheremet (Mathematics, University of Stirling); Enni Ruokamo (Oulu Business School, University of Oulu); Artti Juutinen (NAtural Resources Institute Finland); Rauli Svento (Oulu Business School, University of Oulu); Nick Hanley (School of Geography and Sustainable Development, University of St. Andrews)
    Abstract: This paper considers the problem of designing PES-type contracts to encourage participation and spatial coordination amongst private forest owners in Finland. The aim of the policy is to increase efforts to mitigate risks from invasive forest pests and diseases. Such control actions yield spill-over benefits to other landowners and to wider society, meaning that the level of privately-optimal disease control is likely to be less than the socially-optimal level. The policy designer may wish to encourage spatial coordination in the uptake of such PES-type contracts, as spatial coordination delivers an increase in the effectiveness of control measures on disease risks. We conducted a choice experiment with private forest owners in Finland in October 2016. The study elicited the preferences of woodland owners with respect to the design of forest disease control contracts,and gauged their willingness to cooperate with neighbouring forest owners within the framework of such programs.
    Keywords: Choice Experiment; Payments for Ecosystem Services; Forest Pests and Diseases; Disease Control Measures; Spatial Coordination
    JEL: C35 Q23 Q57
    Date: 2017–11
  5. By: Davide Castellani (Henley Business School, University of Reading); Katiuscia Lavoratori
    Abstract: This paper investigates the determinants of the location of MNEs’ overseas R&D activities, by focusing on two major drivers. On the one hand, external location factors lead the firm to separate its activities along the value chain and geographically disperse these activities in different locations. On the other hand, the R&D location choice may be driven by the existence of internal (within-firm) linkages that motivate firms to locate their value chain activities in the same location (co-location within-firm). Using data from the fDi Markets database, the study examines 2,580 location decisions of new R&D greenfield investments made by MNEs in 110 global cities worldwide, over the period 2003-2014. Results from Conditional and Mixed Logit econometric models reveal that both external and internal factors matter. Findings confirm the strong role of external agglomeration economies, but also suggest that previous R&D and production activities of the same MNE increase the probability to locate R&D in a given global city.
    Keywords: location of international R&D, empirical methodology
    JEL: F23 O30 R30
    Date: 2017–10

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