nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2019‒05‒13
five papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Eliciting Choice Correspondences A General Method and an Experimental Implementation By Elias Bouacida
  2. Farmers’ preferences for water-saving strategies in brazilian eucalypt plantation By Gabriela Demarchi; Subervie Julie; Fernando Palha Leite; Jean-Paul Laclau
  3. An experimental analysis of German farmers’ decisions to buy or rent farmland By Danne, Michael; Buchholz, Matthias; Musshoff, Oliver
  4. Demand and Welfare Analysis in Discrete Choice Models with Social Interactions By Bhattacharya, Debopam; Dupas, Pascaline; Kanaya, Shin
  5. Choice via Social Influence By Abhinash Borah; Christopher Kops

  1. By: Elias Bouacida (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: I introduce a general method for identifying choice correspondences experimentally, i.e., the sets of best alternatives of decision makers in each choice sets. Most of the revealed preference literature assumes that decision makers can choose sets. In contrast, most experiments force the choice of a single alternative in each choice set. In this paper, I allow decision makers to choose several alternatives, provide a small incentive for each alternative chosen, and then randomly select one for payment. I derive the conditions under which the method at least partially identifies the choice correspondence, by obtaining supersets and subsets for each choice set. I illustrate the method with an experiment, in which subjects chose between four paid tasks. I can retrieve the full choice correspondence for 26% of subjects and bind it for another 46%. Subjects chose sets of size 2 or larger 60% of the time, whereas only 3% of them always chose singletons. I then show that 46% of all observed choices can be rationalized by complete, reflexive and transitive preferences in my experiment, i.e., satisfy the Weak Axiom of Revealed Preferences – WARP hereafter. Weakening the classical model, incomplete preferences or just-noticeable difference preferences do not rationalize more choice correspondences. Going beyond WARP, however, I show that complete, reflexive and transitive preferences with menu-dependent choices rationalize 93% of observed choices. Having elicited choice correspondences allows me to conclude that indifference is widespread in the experiment. These results pave the way for exploring various behavioral models with a unified method.
    Keywords: aggregation of preferences,just noticeable preferences,choice correspondences,revealed preferences,welfare,indifference,WARP
    Date: 2019–01
  2. By: Gabriela Demarchi (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Subervie Julie (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Fernando Palha Leite (CENIBRA - Celulose Nipo-Brasileira SA); Jean-Paul Laclau (UMR Eco&Sols - Ecologie fonctionnelle et biogéochimie des sols et des agro-écosystèmes - IRD - Institut de Recherche pour le Développement - INRA - Institut National de la Recherche Agronomique - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement)
    Abstract: In a climate change context, changing temperature and precipitation pattern are expected to have strong impacts on Brazilian eucalyptus plantations. Implementing adaptive water-efficient management practices is thus becoming necessary to maintain high levels of productivity while preserving the water resources. This paper investigates the ability of eucalyptus farmers to modify their current silvicultural practices in order to adapt to drought in the near future. We ran a choice experiment in the state of Minas Gerais, among 80 eucalyptus producers, who were asked to choose from several management options associated with various financial supports. The results show that adaptation by reducing the length of the eucalyptus rotation proves to be by far the preferred option, despite the associated costs. On the contrary, reducing density appears to be the least chosen option by the respondents, which may suggest that they underestimate the benefits of this strategy. We moreover find a clear and relevant segmentation of farmers'choice behavior, the general preference for reducing the length of the eucalyptus rotation being driven by themost vulnerable farmers of the sample.
    Keywords: Brazil,water resources,drought,choice experiment,eucalyptus
    Date: 2019
  3. By: Danne, Michael; Buchholz, Matthias; Musshoff, Oliver
    Abstract: Farmland is a principal production factor in agricultural production. Farmers have the opportunity to buy or to rent farmland. In this paper, we apply a discrete choice experiment (DCE) to analyze farmers’ individual buying and rental decisions for farmland. The net present value (NPV) is used as normative benchmark to evaluate farmers’ decisions in the experiment. Sociodemographic and business variables as well as farmers expectations about developments of farmland prices are used as covariates in the econometric analysis. Our results reveal that farmers have a higher willingness to buy than to rent farmland. Covariates as the farm size and the farmers risk attitude influence the farmers’ decisions in the DCE while no effect was observable for the individual expected purchase price change. Finally, we find that farmers act only in nearly the half of all decision in accordance with the NPV.
    Keywords: Land Economics/Use
    Date: 2019–03–25
  4. By: Bhattacharya, Debopam; Dupas, Pascaline; Kanaya, Shin
    Abstract: Many real-life settings of consumer choice involve social interactions, causing targeted policies to have spillover effects. This paper develops novel empirical tools for analyzing demand and welfare effects of policy interventions in binary choice settings with social interactions. Examples include subsidies for health product adoption and vouchers for attending a high-achieving school. We establish the connection between econometrics of large games and Brock-Durlauf-type interaction models, under both I.I.D. and spatially correlated unobservables. We develop new convergence results for associated beliefs and estimates of preference parameters under increasing domain spatial asymptotics. Next, we show that even with fully parametric specifications and unique equilibrium, choice data, that are sufficient for counterfactual demand prediction under interactions, are insufficient for welfare calculations. This is because distinct underlying mechanisms producing the same interaction coefficient can imply different welfare effects and deadweight-loss from a policy intervention. Standard index-restrictions imply distribution-free bounds on welfare. We illustrate our results using experimental data on mosquito-net adoption in rural Kenya.
    Date: 2019–04
  5. By: Abhinash Borah (Department of Economics, Ashoka University); Christopher Kops (Department of Economics, Ashoka University)
    Abstract: We introduce a theory of socially influenced individual choices. The source of social influence on an individual are his reference groups in society, formed of societal members he psychologically or contextually relates to. Choices made within an individual's reference groups have an influence on the choices he makes. Specifically, we propose a choice procedure under which, in any choice problem, he considers only those alternatives that he can identify with at least one of his reference groups. From this "consideration set," he chooses the best alternative according to his preferences. The procedure is an interactive one and captures the steady state of a process of mutual social influence. We behaviorally characterize this choice procedure. We also highlight the empirical content of the procedure by relating it to both experimental evidence and real world applications.
    Keywords: Individual choice, social influence, reference groups, consideration sets, interactive behavioral choices
    Date: 2018–12

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