nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2019‒07‒08
six papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Does Demand Equal Supply in Ecosystem Service Provision? – Evidence from Finland By Tienhaara, Annika; Haltia, Emmi; Pouta, Eija; Arovuori, Kyösti; Grammatikopoulou, Ioanna; Miettinen, Antti; Koikkalainen, Kauko; Ahtiainen, Heini; Artell, Janne
  2. New Misspecification Tests for Multinomial Logit Models By Fok, D.; Paap, R.
  3. Demand and Welfare Analysis in Discrete Choice Models with Social Interactions By Debopam Bhattacharya; Pascaline Dupas; Shin Kanaya
  4. An automated prior robustness analysis in Bayesian model comparison By Joshua C. C. Chan; Liana Jacobi; Dan Zhu
  5. Common Values, Unobserved Heterogeneity, and Endogenous Entry in U.S. Offshore Oil Lease Auctions By Giovanni Compiani; Philip A. Haile; Marcelo Sant'Anna
  6. Consumer myopia in vehicle purchases: evidence from a natural experiment By Kenneth Gillingham; Sébastien Houde; Arthur A. van Benthem

  1. By: Tienhaara, Annika; Haltia, Emmi; Pouta, Eija; Arovuori, Kyösti; Grammatikopoulou, Ioanna; Miettinen, Antti; Koikkalainen, Kauko; Ahtiainen, Heini; Artell, Janne
    Abstract: In order to integrate ecosystem services (ES) in designing agri-environmental policy, we investigated both the demand for, and supply of, ES from agricultural environments in Finland. Using the discrete choice experiment method, we measured citizens’ willingness to pay (WTP) for four different ES and analysed farmers’ compensation request (WTA) for producing these services. Biodiversity and water quality gathered the highest WTA of farmers, but also highest WTP of citizens. Overall, the average WTA exceeded the WTP for almost all attributes and levels, but 20–27% of farmers were willing to produce the ES with the compensation lower than citizens’ WTP.
    Keywords: Agricultural and Food Policy
    Date: 2019–05–29
  2. By: Fok, D.; Paap, R.
    Abstract: Misspecification tests for Multinomial Logit [MNL] models are known to have low power or large size distortion. We propose two new misspecification tests. Both use that preferences across binary pairs of alternatives can be described by independent binary logit models when MNL is true. The first test compares Composite Likelihood parameter estimates based on choice pairs with standard Maximum Likelihood estimates using a Hausman (1978) test. The second tests for overidentification in a GMM framework using more pairs than necessary. A Monte Carlo study shows that the GMM test is in general superior with respect to power and has correct size
    Keywords: Discrete choices, Multinomial Logit, IIA, Hausman test, Composite Likelihood
    JEL: C25 C12 C52
    Date: 2019–06–01
  3. By: Debopam Bhattacharya; Pascaline Dupas; Shin Kanaya
    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.
    JEL: C31 C35 H23 I38
    Date: 2019–06
  4. By: Joshua C. C. Chan; Liana Jacobi; Dan Zhu
    Abstract: The marginal likelihood is the gold standard for Bayesian model comparison although it is well-known that the value of marginal likelihood could be sensitive to the choice of prior hyperparameters. Most models require computationally intense simulation-based methods to evaluate the typically high-dimensional integral of the marginal likelihood expression. Hence, despite the recognition that prior sensitivity analysis is important in this context, it is rarely done in practice. In this paper we develop efficient and feasible methods to compute the sensitivities of marginal likelihood, obtained via two common simulation-based methods, with respect to any prior hyperparameter alongside the MCMC estimation algorithm. Our approach builds on Automatic Differentiation (AD), which has only recently been introduced to the more computationally intensive setting of Markov chain Monte Carlo simulation. We illustrate our approach with two empirical applications in the context of widely used multivariate time series models.
    Keywords: automatic differentiation, model comparison, vector autoregression, factor models
    JEL: C11 C53 E37
    Date: 2019–06
  5. By: Giovanni Compiani (University of California, Berkeley, Haas School of Business); Philip A. Haile (Cowles Foundation, Yale University); Marcelo Sant'Anna (FGV EPGE)
    Abstract: In a "common values" environment, some market participants have private information relevant to others' assessments of their own valuations or costs. Economic theory shows that this type of informational asymmetry can have important implications for market performance and market design. Yet even for the classic example of an oil lease auction, formal evidence on the presence and strength of common values has been limited by the problem of auction-level unobserved heterogeneity that is likely to affect both participation in an auction and bidders' willingness to pay. Here we develop an empirical approach for first-price sealed bid auctions with affiliated values, unobserved heterogeneity, and endogenous bidder entry. We show that important features of the model are nonparametrically identified and apply a semiparametric estimation approach to data from U.S. offshore oil and gas lease auctions. Our empirical results show that common values, affiliated private information, and unobserved heterogeneity - three distinct phenomena with different implications for policy and empirical work - are all present. Failing to account for unobserved heterogeneity obscures the empirical evidence of common values. We examine the implications of our estimates for the classic revenue ranking of sealed bid auction designs, and for the interaction between affiliation, the winner's curse, and the number of bidders in determining the aggressiveness of bidding and seller revenue.
    Date: 2018–06
  6. By: Kenneth Gillingham; Sébastien Houde; Arthur A. van Benthem
    Abstract: A central question in the analysis of fuel-economy policy is whether consumers are myopic with regards to future fuel costs. We provide the first evidence on consumer valuation of fuel economy from a natural experiment. We examine the short-run equilibrium effects of an exogenous restatement of fuel-economy ratings that affected 1.6 million vehicles. Using the implied changes in willingness-to-pay, we find that consumers act myopically: consumers are indifferent between $1 in discounted fuel costs and 15-38 cents in the vehicle purchase price when discounting at 4%. This myopia persists under a wide range of assumptions.
    Keywords: fuel economy, vehicles, myopia, undervaluation, regulation
    JEL: D12 H25 L11 L62 L71 Q40
    Date: 2019

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