nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2020‒03‒16
nine papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. Is there a market for multi-peril crop insurance in developing countries moving beyond subsidies? Evidence from India: By Ghosh, Ranjan Kumar; Gupta, Shweta; Singh, Vartika; Ward, Patrick S.
  2. Combined Vehicle Type and Fuel Type Choices of Private Households: An Empirical Analysis for Germany By Hackbarth, André; Madlener, Reinhard
  3. Willing to pay for security: a discrete choice experiment to analyse labour supply preferences By Datta, Nikhil
  4. Can local products compete against imports in West Africa? Supply-and demand-side perspectives on chicken, rice, and tilapia in Accra, Ghana: By Andam, Kwaw S.; Ragasa, Catherine; Asante, Seth; Amewu, Sena
  5. Binary Classification Problems in Economics and 136 Different Ways to Solve Them By Anton Gerunov
  6. Influence Of Climate Change On The Corn Yield In Ontario And Its Impact On Corn Farms Income At The 2068 Horizon By Antoine Kornprobst; Matt Davison
  7. Quantifying the intangible impact of the Olympics using subjective well-being data By Dolan, Paul; Kavetsos, Georgios; Krekel, Christian; Mavridis, Dimitris; Metcalfe, Robert; Senik, Claudia; Szymanski, Stefan; Ziebarth, Nicolas R.
  8. Pick Your Poison: The Attribution Paradox in Cyberwar By Jardine, Eric; Porter, Nathaniel D
  9. What is the intrinsic value of fertilizer? Experimental value elicitation and decomposition in the hill and terai regions of Nepal By Ward, Patrick S.; Gupta, Shweta; Singh, Vartika; Ortega, David L.; Gautam, Shriniwas; Guerena, David; Shrestha, Rudra Bahadur

  1. By: Ghosh, Ranjan Kumar; Gupta, Shweta; Singh, Vartika; Ward, Patrick S.
    Abstract: Researchers and policymakers have long understood the benefits of crop insurance but have been consistently disappointed by the poor performance of these programs. Rarely have programs seen sizeable take-up rates without support through large government subsidies, and in many countries, demand has been meager even at prices well below fair-market rates. Experiences from India have largely followed this trend, despite a number of large policy initiatives. Limited demand stems from low perceived value, arguably because the existing insurance products are unsuited to farmers’ needs. The present study fills an important gap in rural development by improving upon existing insurance policy design by incorporating product characteristics better suited to farmers’ preferences. To do so, we conducted a discrete choice experiment with agricultural households in four states in India. While farmers seem to like several of the features of policies offered under existing programs, our results suggest they would generally be willing to pay more than the highly subsidized rate they currently pay and are also clearly dissatisfied with delayed and uncertain indemnity payments and would be willing to pay a significant premium for more assured and timely payment delivery.
    Keywords: INDIA, SOUTH ASIA, ASIA, crop insurance, willingness to pay, agriculture, agricultural policies, subsidies, developing countries, farmers, discrete choice experiments, government subsidies, crop insurance program, Q10 Agriculture: General, Q11 Agriculture: Aggregate Supply and Demand Analysis, Prices, Q18 Agricultural Policy, Food Policy,
    Date: 2019
  2. By: Hackbarth, André (Reutlingen Energy Center for Distributed Energy Systems and Energy Efficiency); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: This paper examines joint consumer purchasing decisions of vehicle type and fuel type based on a dataset from a Germany-wide survey among 1500 potential car buyers. The goal is to study the buyer segments that are considering to purchase the different types of vehicles and to identify the main determinants influencing the joint choice decision: socio-demographic and household characteristics, attitudes and preferences, as well as vehicle-related attributes. Based on a nested logit model, our results suggest that although German car buyers’ are very heterogeneous regarding their preferences, several similarities are found between buyers of specific vehicle types (10 vehicle classes) and specific fuel types (gasoline, diesel, alternative fuel), e.g. smaller cars and alternative fuel vehicles (AFVs) have commonalities regarding individual’s environmental awareness/behavior and fuel consumption/costs. Policy-makers, when tailoring their policies, can benefit from making use of the specific insights gained from this particularly comprehensive study, and the comparisons made with the German and international scientific literature on the topic. For instance, the similarities between buyers preferring specific fuel types and specific vehicle types can be used for tailorized measures to incentivize individuals’ vehicle type shifting (e.g from larger to smaller vehicles), fuel type switching (e.g. from fossil-fuelled vehicles to AFVs), or both.
    Keywords: Discrete choice; Revealed preferences; Stated intentions; Nested logit model; Alternative fuel vehicles; Vehicle segments
    JEL: C35 C38 D12 M38 R48
    Date: 2018–12
  3. By: Datta, Nikhil
    Abstract: This paper investigates the extent to which labour supply preferences are responsible for the marked rise in atypical work arrangements in the UK and US. By employing vignettes in a discrete job choice experiment in a representative survey, I estimate the distribution for preferences and willingness-to-pay over various job attributes. The list of attributes includes key distinguishing factors of typical and atypical work arrangements, such as security, work-related benefits, flexibility, autonomy and taxation implications. The results are indicative that the majority of the population prefer characteristics associated with traditional employee-employer relationships, and this preference holds even when analysing just the sub-sample of those in atypical work arrangements. Additionally, preferences across the UK and US are very similar, despite differences in labour market regulations. Rather than suggesting that labour supply preferences have contributed to the increase in atypical work arrangements, I find that the changing nature of work is likely to have significant negative welfare implications for many workers.
    Keywords: atypical work; self-employment; willingness-to-pay; experiment; labour supply preferences
    JEL: J22 J24 J32 J81
    Date: 2019–07
  4. By: Andam, Kwaw S.; Ragasa, Catherine; Asante, Seth; Amewu, Sena
    Abstract: This paper examines the prospects for import substitution in West Africa by analyzing the preferences of urban consumers for food product attributes. We use market surveys, choice experiments, and experimental auctions to assess price and quality competitiveness of locally-produced chicken, rice, and tilapia in Accra, Ghana. For the price analysis, we compare market prices of imported and local counterparts, and we compare the local costs of production to production costs in major exporting countries. For the quality analysis, we compare consumer perceptions and demand for quality attributes of local versus imported products using data from field experiments with 1,322 consumers. Our findings suggest that among the three products, rice has the lowest prospects for import substitution, due to supply-and demand-side constraints to local competitiveness. For rice, consumers prefer imported products, they perceive imports as having better quality than local products, and they are willing to pay a premium for imports. For chicken, consumers have a strong preference for local products, but the potential for expanding chicken production can only be met if production and processing costs can be reduced significantly to boost price competitiveness. For tilapia, a high preference for freshness provides a natural barrier to import entry, and the comparative advantage of local production can be enhanced by making continuous improvements in seed and extension systems, industry coordination, certification, and regulation.
    Keywords: GHANA, WEST AFRICA, AFRICA SOUTH OF SAHARA, AFRICA, willingness to pay, tilapia, rice, chickens, supply balance, import substitution, imports, economic, competition, trade, local competitiveness, import substitution strategies, choice experiments, experimental auctions, supply and demand, local products, local production, price competitiveness,
    Date: 2019
  5. By: Anton Gerunov (Faculty of Economics and Business Administration, Sofia University ÒSt. Kliment Ohridski")
    Abstract: This article investigates the performance of 136 different classification algorithms for economic problems of binary choice. They are applied to model five different choice situations Ð consumer acceptance during a direct marketing campaign, predicting default on credit card debt, credit scoring, forecasting firm insolvency, and modelling online consumer purchases. Algorithms are trained to generate class predictions of a given binary target variable, which are then used to measure their forecast accuracy using the area under a ROC curve. Results show that algorithms of the Random Forest family consistently outperform alternative methods and may be thus suitable for modelling a wide range of discrete choice situations.
    Keywords: Bdiscrete choice, classification, machine learning algorithms, modelling decisions.
    JEL: C35 C44 C45 D81
    Date: 2020–03
  6. By: Antoine Kornprobst; Matt Davison
    Abstract: Our study aims at quantifying the impact of climate change on corn farming in Ontario under several warming scenarios at the 2068 horizon. It is articulated around a discrete-time dynamic model of corn farm income with an annual time-step, corresponding to one agricultural cycle from planting to harvest. At each period, we compute the income given the corn yield, which is highly dependent on weather variables. We also provide a reproducible forecast of the yearly distribution of corn yield for 10 cities in Ontario. The price of corn futures at harvest time is taken into account and we fit our model by using 49 years of historical data. We then conduct out-of-sample Monte-Carlo simulations to obtain the farm income forecasts under a given climate change scenario.
    Date: 2020–03
  7. By: Dolan, Paul; Kavetsos, Georgios; Krekel, Christian; Mavridis, Dimitris; Metcalfe, Robert; Senik, Claudia; Szymanski, Stefan; Ziebarth, Nicolas R.
    Abstract: Hosting the Olympic Games costs billions of taxpayer dollars. Following a quasi-experimental setting, this paper assesses the intangible impact of the London 2012 Olympics, using a novel panel of 26,000 residents in London, Paris, and Berlin during the summers of 2011, 2012, and 2013. We show that hosting the Olympics increases subjective well-being of the host city's residents during the event, particularly around the times of the opening and closing ceremonies. However, we do not find much evidence for legacy effects. Estimating residents' implicit willingness-to-pay for the event, we do not find that it was worth it for London alone, but a modest well-being impact on the rest of the country would make hosting worth the costs.
    Keywords: Subjective well-being; Life satisfaction; Happiness; Intangible effects; Olympic Games; Sport events; Quasi-natural experiment
    JEL: I30 I31 I38 L83
    Date: 2019–08
  8. By: Jardine, Eric; Porter, Nathaniel D (Virginia Tech)
    Abstract: Certainty matters in cyberspace. The so-called attribution problem can impede deterrence, making cyberattacks more likely. But attribution problems can also limit conflict escalation, keeping nations safer. Using a discrete choice experimental design, this article quantifies the scope of the attribution problem for both deterrence and escalation. The results suggest that the attribution problem is really only a problem for deterrence and actually helps limit conflict escalation by reducing support for more severe retaliatory options.
    Date: 2020–02–26
  9. By: Ward, Patrick S.; Gupta, Shweta; Singh, Vartika; Ortega, David L.; Gautam, Shriniwas; Guerena, David; Shrestha, Rudra Bahadur
    Abstract: The government in Nepal faces double burden of enhancing fertilizer application rates in the country by investing in efforts to boost demand and at the same time, managing its dependence on global markets to fulfill the supply of important nutrients such as Urea and DAP. Without an understanding of the true valuation of fertilizers for farmers, achieving this balance would be difficult. We use Becker-DeGroot-Marshak value elicitation methods to derive the intrinsic value that farmers in Nepal place on fertilizers. Eliciting values under three distinct procurement scenarios, we are able to decompose the total intrinsic value of fertilizer into a willingness-to-pay (WTP) to travel to procure fertilizer, a WTP for assured fertilizer supplies, and a WTP for the productivity benefits of fertilizer. Disaggregating our sample according to location (hills versus terai), we are able to estimate differences in total intrinsic value as well as value components along these geographical dimensions. While farmers in the hills are generally willing to pay more for urea than their counterparts in the terai, the total amount they are willing to pay is, on average, less than the market price for urea. We explore heterogeneity in valuations and discuss the implications of our findings on fertilizer procurement and distribution policies, as well as direct support policies that the Nepal government may consider. While support policiessuch as subsidies may encourage increased utilization of fertilizers, policies that lower barriers to private sector entry and increase the density of fertilizer retailers could also increase fertilizer utilization.
    Keywords: NEPAL, SOUTH ASIA, ASIA, fertilizers, subsidies, willingness to pay, application rates, agricultural policies, experimentation, fertilizer policy, experimental auctions, fertilizer application, agricultural development,
    Date: 2019

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