nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2022‒01‒17
six papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

  1. A discrete choice model for partially ordered alternatives By Eleni Aristodemou
  2. Posterior average effects By Stéphane Bonhomme; Martin Weidner
  3. Labour supply, service intensity, and contracts: Theory and evidence on physicians By Bernard Fortin; Nicolas Jacquemet; Bruce Shearer
  4. Is There an Energy Efficiency Gap in China? Evidence from an Information Experiment By Graham Beattie; Iza Ding; Andrea La Nauze
  5. The Ability to 'Distill the Truth' By Assenza, Tiziana
  6. Identification of misreported beliefs By Elias Tsakas

  1. By: Eleni Aristodemou (Institute for Fiscal Studies and University College London)
    Abstract: In this paper we analyze a discrete choice model for partially ordered alternatives. The alternatives are differentiated along two dimensions, the ?rst an unordered “horizontal” dimension, and the second an ordered “vertical” dimension. The model can be used in circumstances in which individuals choose amongst products of different brands, wherein each brand offers an ordered choice menu, for example by offering products of varying quality. The unordered-ordered nature of the discrete choice problem is used to characterize the identi?ed set of model parameters. Following an initial nonparametric analysis that relies on shape restrictions inherent in the ordered dimension of the problem, we then provide a specialized analysis for parametric speci?cations that generalize common ordered choice models. We characterize conditional choice probabilities as a function of model primitives with particular analysis focusing on cases in which unobservable taste for quality of each brand offering is multivariate normally distributed. We provide explicit formulae used for estimation and inference via maximum likelihood, and we consider inference based on Wald and quasi-likelihood ratio statistics, the latter of which can be robust to a possible lack of point identi?cation. An empirical illustration is conducted using consumer purchase data in the UK to study consumers’ choice of razor blades in which each brand has product o?erings vertically di?erentiated by quality.
    Date: 2021–08–05
  2. By: Stéphane Bonhomme (Institute for Fiscal Studies and University of Chicago); Martin Weidner (Institute for Fiscal Studies and University College London)
    Abstract: Economists are often interested in estimating averages with respect to distributions of unobservables, such as moments of individual fixed-effects, or average partial effects in discrete choice models. For such quantities, we propose and study posterior average effects (PAE), where the average is computed conditional on the sample, in the spirit of empirical Bayes and shrinkage methods. While the usefulness of shrinkage for prediction is well-understood, a justification of posterior conditioning to estimate population averages is currently lacking. We show that PAE have minimum worst-case specification error under various forms of misspecification of the parametric distribution of unobservables. In addition, we introduce a measure of informativeness of the posterior conditioning, which quantifies the worst-case specification error of PAE relative to parametric model-based estimators. As illustrations, we report PAE estimates of distributions of neighborhood effects in the US, and of permanent and transitory components in a model of income dynamics.
    Date: 2021–09–10
  3. By: Bernard Fortin; Nicolas Jacquemet (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Bruce Shearer
    Abstract: Based on linked administrative and survey panel data, we analyze the labour supply behaviour of physicians who could adopt either a standard fee-for-service contract or a mixed remuneration (MR) contract. Under MR, physicians received a per diem and a reduced fee for services provided. We present estimates of a structural discrete choice model that incorporates service intensity (services provided per hour) and contract choice into a labour supply framework. We use our estimates to predict (ex ante) the effects of contracts on physician behaviour and welfare, as measured by average equivalent variations. The supply of services is reduced under a MR contract, suggesting incentives matter. Hours spent seeing patients is less sensitive to incentives than the supply of services. Our results suggest that a reform forcing all physicians to adopt the MR system would have substantially larger effects on physician behaviour than were measured under the observed reform. A pure salary (per diem) reform would sharply reduce services but would increase time spent seeing patients.
    Keywords: Practice Patterns of Physicians,Labour Supply,Service Intensity,Fee-for-Service Contract,Mixed Remuneration Contract,Discrete Choice Models
    Date: 2021–09
  4. By: Graham Beattie; Iza Ding; Andrea La Nauze
    Abstract: We provide evidence of an energy efficiency gap in China. Using an incentivized field experiment, we document that providing information to consumers on the energy costs of lightbulbs significantly affects their willingness to pay for energy efficient bulbs. Unlike previous literature, we do not find evidence that this gap is driven by biased beliefs. Further our experimental design allows us to rule out that changes in willingness to pay are driven purely by the salience of the monetary or environmental costs of lightbulbs. We argue that the results are consistent with consumers being risk averse and uncertain about the benefits of more energy efficient appliances.
    Keywords: energy-efficiency, lightbulbs, information experiment
    JEL: Q40 H23
    Date: 2021
  5. By: Assenza, Tiziana
    Abstract: Employing a representative US online panel, we document strong imprecision in people’s beliefs about their ability to assess the accuracy of news headlines. With a randomized information experiment, we show that revelation of the true abil- ity causally adjusts beliefs and improves their precision. The effect is stronger for subjects who are overconfident about own ability and this is driven by gender dif- ferences in the reaction to this information. Finally, we also find that the provision of information on ability increases the willingness to pay for an insurance against the risk of being harmed by misinformation, among risk-averse participants.
    Date: 2021–12–20
  6. By: Elias Tsakas
    Abstract: It is well-known that subjective beliefs cannot be identified with traditional choice data unless we impose the strong assumption that preferences are state-independent. This is seen as one of the biggest pitfalls of incentivized belief elicitation. The two common approaches are either to exogenously assume that preferences are state-independent, or to use intractable elicitation mechanisms that require an awful lot of hard-to-get non-traditional choice data. In this paper we use a third approach, introducing a novel methodology that retains the simplicity of standard elicitation mechanisms without imposing the awkward state-independence assumption. The cost is that instead of insisting on full identification of beliefs, we seek identification of misreporting. That is, we elicit beliefs with a standard simple elicitation mechanism, and then by means of a single additional observation we can tell whether the reported beliefs deviate from the actual beliefs, and if so, in which direction they do.
    Date: 2021–12

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