nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2019‒09‒16
five papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Discrete choice prox-functions on the simplex By David M\"uller; Yurii Nesterov; Vladimir Shikhman
  2. State-Dependent Demand Estimation with Initial Conditions Correction By Andrey Simonov; Jean-Pierre H. Dubé; Günter J. Hitsch; Peter E. Rossi
  3. Recovering Preferences from Finite Data By Christopher P. Chambers; Federico Echenique; Nicolas Lambert
  4. An experimental test of the solemn oath in eliciting sincere preferences By Wu, Hanxiao; Qin, Botao
  5. Coffee farmers’ motivations to comply with sustainability standards By Sylvaine Lemeilleur; Subervie Julie; Anderson Edilson Presoto; Roberta de Castro Souza; Maria Sylvia Macchione Saes

  1. By: David M\"uller; Yurii Nesterov; Vladimir Shikhman
    Abstract: We derive new prox-functions on the simplex from additive random utility models of discrete choice. They are convex conjugates of the corresponding surplus functions. In particular, we explicitly derive the convexity parameter of discrete choice prox-functions associated with generalized extreme value models, and specifically with generalized nested logit models. Incorporated into subgradient schemes, discrete choice prox-functions lead to natural probabilistic interpretations of the iteration steps. As illustration we discuss an economic application of discrete choice prox-functions in consumer theory. The dual averaging scheme from convex programming naturally adjusts demand within a consumption cycle.
    Date: 2019–09
  2. By: Andrey Simonov; Jean-Pierre H. Dubé; Günter J. Hitsch; Peter E. Rossi
    Abstract: We analyze the initial conditions bias in the estimation of brand choice models with structural state dependence. Using a combination of Monte Carlo simulations and empirical case studies of shopping panels, we show that popular, simple solutions that mis-specify the initial conditions are likely to lead to bias even in relatively long panel datasets. The magnitude of the bias in the state dependence parameter can be as large as a factor of 2 to 2.5. We propose a solution to the initial conditions problem that samples the initial states as auxiliary variables in an MCMC procedure. The approach assumes that the joint distribution of prices and consumer choices, and hence the distribution of initial states, is in equilibrium. This assumption is plausible for the mature consumer packaged goods products used in this and the majority of prior empirical applications. In Monte Carlo simulations, we show that the approach recovers the true parameter values even in relatively short panels. Finally, we propose a diagnostic tool that uses common, biased approaches to bound the values of the state dependence and construct a computationally light test for state dependence.
    JEL: D12 L66 M3
    Date: 2019–09
  3. By: Christopher P. Chambers; Federico Echenique; Nicolas Lambert
    Abstract: We study preferences recovered from finite choice experiments and provide sufficient conditions for convergence to a unique underlying `true' preference. Our conditions are weak, and therefore valid in a wide range of economic environments. We develop applications to expected utility theory, choice over consumption bundles, menu choice or intertemporal consumption. Our framework unifies the revealed preference tradition with models that allow for errors.
    Date: 2019–09
  4. By: Wu, Hanxiao; Qin, Botao
    Abstract: Hypothetical bias is the gap between the hypothetical willingness to pay and the real economic payment. Subjects may overstate or understate their willingness to pay due to strategic behaviour. This bias is common in contingent valuation studies. In this study, we attempt to use a commitment device to correct the bias, in order to elicit sincere preferences. We use a solemn oath in second-price auctions, using both induced valuations and homegrown valuations. Using a random effect panel data model, we draw three conclusions: (1) there is a gap between subjects' bids and their true willingness to pay due to the violation of both the budget constraint and the participation constraint; (2) oaths in the induced value experiment can increase subjects' bids towards the induced value only given real monetary incentives; (3) oaths can modestly correct the hypothetical bias in the homegrown valuation experiment.
    Keywords: Preference elicitation, Oath, Second-price auction, Induced-value experiment, Homegrown valuation
    JEL: C90 D44 Q51
    Date: 2019–07
  5. By: Sylvaine Lemeilleur (UMR MOISA - Marchés, Organisations, Institutions et Stratégies d'Acteurs - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - INRA Montpellier - Institut national de la recherche agronomique [Montpellier] - CIHEAM-IAMM - Centre International de Hautes Etudes Agronomiques Méditerranéennes - Institut Agronomique Méditerranéen de Montpellier - CIHEAM - Centre International de Hautes Études Agronomiques Méditerranéennes - 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); Anderson Edilson Presoto (USP - University of São Paulo); Roberta de Castro Souza (USP - University of São Paulo); Maria Sylvia Macchione Saes (USP - University of São Paulo)
    Abstract: Purpose: to investigate the incentives to coffee farmers to participate in certification schemes that require improved agricultural practices. Design/methodology: we ran a choice experiment among 250 Brazilian coffee farmers in the state of Minas Gerais, Brazil. Findings: Our findings show that both cash and non-cash payments are likely to incentive farmers' participation in a certification scheme. Besides price premium, incentives as long-term contracts and provision of technical would encourage producers to adopt eco-certification schemes. Our results also suggest that non-cash payments may be appropriate substitutes to a price premium to some extent. Research limitations: the large coffee producers are over-represented in our sample compared to the population of Brazilian coffee farms. However, it seems reasonable to focus on these producers, as they are usually the ones who individually adopt strategies, since small farmers are induced by collective strategies (e.g., cooperatives). Practical Implications: the fact that farmers place a high value on non-cash rewards suggests that designing effective certification schemes is an important consideration for organizations that develop sustainability standards, and that public (re)intervention through technical assistance may become necessary when the market is unable to provide a price premium high enough to offset the compliance costs associated with the most stringent environmental requirements. Originality/value: we contributed in the literature about adoption of sustainable agriculture practices analyzing the requirements and motivations for farmer participation in certification schemes. We also contribute private and public strategies to encourage the adoption of sustainable practices.
    Keywords: certification,choice experiment,Brazil,coffee,pesticides,compost,erosion.,voluntary sustainability standards
    Date: 2019

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