nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2019‒11‒04
seven papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Detecting social network effects on willingness to pay for environmental improvements using egocentric network measures By Janmaat, Johannus; Geleta, Solomon; Loomis, John
  2. The causal effect of religious and environmental identity on green preferences: A combined priming and stated choice experiment By Engler, Daniel; Groh, Elke D.; Ziegler, Andreas
  3. Lexicographic Choice Under Variable Capacity Constraints By Battal Dogan; Serhat Dogan; Kemal Yildiz
  4. The Value of Precise Communication in Persuasion By Eray Turkel; Yunus C. Aybas
  5. A Combined Random Effect and Fixed Effect Forecast for Panel Data Models By Tae-Hwy Lee; Bai Huang; Aman Ullah
  6. The Effect of Information Provision on Stated and Revealed Preferences:A Field Experiment on the Choice of Power Tariffs Before and After Japanese Retail Electricity Liberalization By Takanori IDA; Takunori ISHIHARA
  7. Hump-shaped cross-price effects and the extensive margin in cross-border shopping By Friberg, Richard; Steen, Frode; Ulsaker, Simen A.

  1. By: Janmaat, Johannus; Geleta, Solomon; Loomis, John
    Abstract: Since people care about each other, an individual's willingness to pay to protect an environmental good or service will reflect their concern for others who would also be impacted by a change in the good or service. Through the extended social network, an individual's willingness to pay will reflect the impacts on people who they do not immediately know. If this effect is not considered, willingness to pay estimates can be biased. However, extended social networks are difficult to measure. We therefore explored the potential for egocentric social networks to help explain variations in willingness to pay. Given the conventional way of describing social networks, we demonstrate that egocentric social network measures should not be related to willingness to pay if there is no relationship between the social network measure and the willingness to pay for a change in the environmental good or service. When the social network measures are increasing in the willingness to pay for an environmental improvement, then a regression of willingness to pay on these social network measures will show a positive relationship. Empirically, we find such a relationship in the results of a choice experiment conducted in the central Okanagan of British Columbia. However, we also find that a measure of peoples assessment of the benefits of development relative to the environmental impacts was a more effective predictor. This may be a consequence of how the respondent's egocentric networks were measured. Alternative approaches to measuring the egocentric social network may be necessary.
    Keywords: Social network effects, egocentric, sociocentric, prosocial, ego-alter, random utility, network centrality
    JEL: Q24 Q25 Q51 Q57
    Date: 2019–10–23
  2. By: Engler, Daniel; Groh, Elke D.; Ziegler, Andreas
    JEL: Q42 Q54 A13 C25 Z12
    Date: 2019
  3. By: Battal Dogan; Serhat Dogan; Kemal Yildiz
    Abstract: In several matching markets, in order to achieve diversity, agents' priorities are allowed to vary across an institution's available seats, and the institution is let to choose agents in a lexicographic fashion based on a predetermined ordering of the seats, called a (capacity-constrained) lexicographic choice rule. We provide a characterization of lexicographic choice rules and a characterization of deferred acceptance mechanisms that operate based on a lexicographic choice structure under variable capacity constraints. We discuss some implications for the Boston school choice system and show that our analysis can be helpful in applications to select among plausible choice rules.
    Date: 2019–10
  4. By: Eray Turkel; Yunus C. Aybas
    Abstract: Persuasion is an exceedingly difficult task. A leading cause of this difficulty is the misalignment of preferences, which is studied extensively by the literature on persuasion games. However, the difficulty of communication also has a first order effect on outcomes and welfare of agents. Motivated by this observation, we study a model of Bayesian persuasion in which the communication between the sender and the receiver is constrained. We limit the cardinality of the signal space to be less than the cardinality of the action space and the state space. This limits the sender's ability of making arbitrarily many action recommendations. We prove the existence of a solution to the sender's utility maximization problem and characterize its properties. In solving this problem, we develop a novel approach for solving Bayesian persuasion problems, which can be applied to a wide range of settings. We characterize the sender's willingness to pay for an additional signal as a function of the prior belief, which we interpret as the value of precise communication. We show that increased precision might not be always welfare improving by showing that the receiver might prefer coarse communication.
    Date: 2019–10
  5. By: Tae-Hwy Lee (Department of Economics, University of California Riverside); Bai Huang (CUFE); Aman Ullah (UCR)
    Abstract: When some of the regressors in a panel data model are correlated with the random individual effects, the random effect (RE) estimator becomes inconsistent while the fixed effect (FE) estimator is consistent. Depending on the various degree of such correlation, we can combine the RE estimator and FE estimator to form a combined estimator which can be better than each of the FE and RE estimators. In this paper, we are interested in whether the combined estimator may be used to form a combined forecast to improve upon the RE forecast (forecast made using the RE estimator) and the FE forecast (forecast using the FE estimator) in out-of-sample forecasting. Our simulation experiment shows that the combined forecast does dominate the FE forecast for all degrees of endogeneity in terms of mean squared forecast errors (MSFE), demonstrating that the theoretical results of the risk dominance for the in-sample estimation carry over to the out-of-sample forecasting. It also shows that the combined forecast can reduce MSFE relative to the RE forecast for moderate to large degrees of endogeneity and for large degrees of heterogeneity in individual effects.
    Keywords: Endogeneity, Panel Data, Fixed Effect, Random Effect, Hausman test, Combined Estimator, Combined Forecast.
    JEL: C13 C33 C52
    Date: 2018–12
  6. By: Takanori IDA; Takunori ISHIHARA
    Abstract: We consider the case of choosing an electricity fee plan and examine differences in attitudes toward each plan by providing information on electricity bills, which is either based on test participants’ past electricity consumption or not. We conducted randomized control trial stated preference (SP) and revealed preference (RP) experiments on the choice of electricity rates before and after liberalization. In the SP experiment, we found that providing information that informs the participant of their benefit or loss from switching corrects the tendency toward overconfidence and the evaluation value attached to the potential benefit of switching declines. By analyzing the benefit and loss separately, we further clarified that this drop exemplifies the loss aversion tendency. The evaluation value drops greatly when information about a loss is provided; however, this drop is not proportionate to the magnitude of the loss. The RP experiment differ from the SP experiment results. We found that that the selection was not boosted in both gain and loss cases.
    Keywords: Randomized controlled trial (RCT), Stated preference, Revealed preference, Information provision, Power tariff, Overconfidence.
    JEL: C93 D91 Q49
    Date: 2019–10
  7. By: Friberg, Richard (Stockholm School of Economics); Steen, Frode (Dept. of Economics, Norwegian School of Economics and Business Administration); Ulsaker, Simen A. (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: This paper examines the effect of cross-border shopping on grocery demand in Norway using monthly store×category sales data from Norway’s largest grocery chain 2011-2016. The sensitivity of demand to foreign price is hump-shaped and greatest 30-60 minutes’ driving distance from the closest foreign store. Combining continuous demand, fixed costs of cross-border shopping and linear transport costs `a la Hotelling we show how this hump-shape can arise through a combination of intensive and extensive margins of cross-border shopping. Our conclusions are further supported by novel survey evidence and cross-border traffic data.
    Keywords: Cross-border shopping; competition in grocery markets; product differentiation
    JEL: F15 H73 L66 R20
    Date: 2018–12–17

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