nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2018‒02‒05
two papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. A Dirichlet Process Mixture Model of Discrete Choice By Rico Krueger; Akshay Vij; Taha H. Rashidi
  2. Fairness in Markets and Market Experiments By Engelmann, Dirk; Friedrichsen, Jana; Kübler, Dorothea

  1. By: Rico Krueger; Akshay Vij; Taha H. Rashidi
    Abstract: We present a mixed multinomial logit (MNL) model, which leverages the truncated stick-breaking process representation of the Dirichlet process as a flexible nonparametric mixing distribution. The proposed model is a Dirichlet process mixture model and accommodates discrete representations of heterogeneity, like a latent class MNL model. Yet, unlike a latent class MNL model, the proposed discrete choice model does not require the analyst to fix the number of mixture components prior to estimation, as the complexity of the discrete mixing distribution is inferred from the evidence. For posterior inference in the proposed Dirichlet process mixture model of discrete choice, we derive an expectation maximisation algorithm. In a simulation study, we demonstrate that the proposed model framework can flexibly capture differently-shaped taste parameter distributions. Furthermore, we empirically validate the model framework in a case study on motorists' route choice preferences and find that the proposed Dirichlet process mixture model of discrete choice outperforms a latent class MNL model and mixed MNL models with common parametric mixing distributions in terms of both in-sample fit and out-of-sample predictive ability. Compared to extant modelling approaches, the proposed discrete choice model substantially abbreviates specification searches, as it relies on less restrictive parametric assumptions and does not require the analyst to specify the complexity of the discrete mixing distribution prior to estimation.
    Date: 2018–01
  2. By: Engelmann, Dirk (Humboldt University Berlin); Friedrichsen, Jana (Humboldt University Berlin and DIW); Kübler, Dorothea (WZB and TU Berlin)
    Abstract: Whether pro-social preferences identified in economic laboratories survive in natural market contexts is an important and contested issue. We investigate how fairness in a laboratory experiment framed explicitly as a market exchange relates to preferences for fair trade products before and after the market experiment. We find that the willingness to buy at a higher price when higher wages are paid to the worker correlates both with the choice for a fair trade product before the laboratory experiment and with whether the participants are willing to pay a positive fair trade premium, elicited at the end of the experiment. These results support the notion that fairness preferences as assessed in laboratory experiments capture preferences for fair behavior in comparable situations outside the laboratory.
    Keywords: fairness; market experiments; external validity; fair trade;
    JEL: C91 D01 D91
    Date: 2018–01–18

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