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on Discrete Choice Models |
| By: | Pouya Janghorban; Temilade Sesan; Muhammad-Kabir Salihu; Olayinka Ohunakin; Narges Chinichian |
| Abstract: | Rural electrification initiatives worldwide frequently encounter financial planning challenges due to a lack of reliable market insights. This research delves into the preferences and marginal willingness to pay (mWTP) for upfront electricity connections in rural and peri-urban areas of Nigeria. We investigate discrete choice experiment data gathered from 3, 599 households and 1, 122 Small to Medium-sized Enterprises (SMEs) across three geopolitical zones of Nigeria, collected during the 2021 PeopleSuN project survey phase. Employing conditional logit modeling, we analyze this data to explore preferences and marginal willingness to pay for electricity connection. Our findings show that households prioritize nighttime electricity access, while SMEs place a higher value on daytime electricity. When comparing improvements in electricity capacity to medium or high-capacity, SMEs exhibit a sharp increase in willingness to pay for high-capacity, while households value the two options more evenly. Preferences for the electricity source vary among SMEs, but households display a reluctance towards diesel generators and a preference for the grid or solar solutions. Moreover, households with older heads express greater aversion to connection fees, and male-headed households show a stronger preference for nighttime electricity compared to their female-headed counterparts. The outcomes of this study yield pivotal insights to tailor electrification strategies for rural Nigeria, emphasizing the importance of considering the diverse preferences of households and SMEs. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.15757 |
| By: | Zhen, Shihang; Xia, Xianli; Huang, Luchen; Cao, Yihan; Fu, Hanliang; Ren, Yanjun |
| Abstract: | With the prominence of nutrition-related health issues worldwide, functional food is supposed to be an efficient way to address this challenge by achieving its nutrition and health benefits. However, whether consumers are willing to pay (WTP) for high-nutritional value foods of this kind and what is the role of consumers’ risk preferences in their WTPs are unclear. This study employs a discrete choice experiment (DCE) to investigate the effect of risk preferences on consumers’ preferences and WTPs for functional food, focusing on four attributes of dairy products: origin, organic label, functionality and price. We also seek to understand the physiological mechanisms underlying this effect by a lab experiment using eye-tracking technology. The results show that consumers have various preferences and WTPs for different attributes of milk, but they are reluctant to pay for functional milk. Compared to consumers with low-risk preferences, consumers with high-risk preferences are more willing to purchase functional milk. The evidence from eye-tracking experiments indicates that visual attention to the attributes considered positively correlates with their consumption preference. Consumers with high-risk preferences tend to pay more attention to the functional attribute and therefore have a higher prob- ability of purchasing functional milk. This study implies that consumers’ risk preferences should be considered when promoting consumers to purchase functional food, as different consumers have significantly distinct preferences. |
| Keywords: | Food Consumption/Nutrition/Food Safety, Institutional and Behavioral Economics |
| Date: | 2024–08–07 |
| URL: | https://d.repec.org/n?u=RePEc:ags:cfcp15:344293 |
| By: | Yilong Xu (Utrecht School of Economics, Utrecht University); Mikolaj Czajkowski (Faculty of Economic Sciences, University of Warsaw); Nick Hanley (University of Glasgow); Leonhard Lades (University of Stirling); Charles N. Noussair (Eller College of Management, University of Arizona); Steven Tucker (University of Waikato) |
| Abstract: | We consider how people's emotions affect their stated preferences and willingness to pay for changes in environmental quality, focusing on the effect of incidental emotions. We use videos to induce emotional states and test the replicability of the results reported in Hanley et al. (2016). Additionally, we employ a novel methodology - Face reading software - to verify whether the intended emotional states were successfully induced. We find that our treatments succeed in implementing the predicted emotional condition in terms of self-reported emotions, but had a variable effect on measured (estimated) emotional states. We replicate the result from Hanley et al. (2016): induced emotional state has no significant effect on stated preference estimates or on willingness to pay for an environmental quality change. Moreover, we confirm that, irrespective of the treatment assignment or emotional state - be it self-reported or measured - we observe no significant effect of emotion on preference estimates. We conclude that stated preference estimates for environmental change are unaffected by changes in incidental emotions. Our results suggest that preference estimates are robust to the emotional state of the responder. |
| Keywords: | Choice experiments; Laboratory Experiments; Behavioral Economics; Environmental Valuation; Emotions; Cost-Benefit Analysis |
| JEL: | Q51 Q57 D03 |
| Date: | 2024–08–05 |
| URL: | https://d.repec.org/n?u=RePEc:wai:econwp:24/06 |
| By: | Aditya, Korekallu Srinivasa; Dagmar, Mithöfer |
| Abstract: | Solar-Powered Irrigation Systems (SPIS) are an important component of India’s effort towards sustainable energy transition and are promoted with financial support under the PM-KUSUM program. In spite of the promise and the policy push, the adoption of SPIS is low. In this paper, we use the Discrete Choice Experiment (DCE) for evaluating the policy attributes in the promotion of SPIS. We selected five attributes of SPIS with different levels for the choice experiment, and a ‘D-efficient’ non-zero prior choice experimental design was used. The data was collected from 500 farmers randomly chosen from 31 villages across Mysore district, Karnataka, India, and analyzed using the random parameter logit model. For a nuanced interpretation and contextualization of the results, follow-up qualitative interviews were conducted. The results highlight that farmers preference, as indicated by the highest part worth, is for a loan with a repayment holiday of three years, followed by guaranteed service provision for 10 years. Given that SPIS is a new technology with a high initial investment, easing liquidity constraints and assuring farmers with guaranteed repair services act as strong incentives to adopt it. These findings can be incorporated into the existing policies so that they align well with farmers' preferences. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2024–07–26 |
| URL: | https://d.repec.org/n?u=RePEc:ags:cfcp15:344382 |
| By: | Akoko, Peter Obuon; Gathungu, Edith; De Groote, Hugo |
| Abstract: | Maize is most common staple food in Sub-Saharan Africa but in most cases, preserved using the traditional drying method which expose maize to severe losses and quality deterioration. Improved maize drying methods are therefore considered an alternative technique to dry maize. Studies from developed countries have found improved dryers to be more efficient and sustainable, however, developing countries like Kenya are still yet to adopt these technologies. Evaluating smallholder maize farmers’ willingness to pay for improved maize dryers in Njoro Sub-County explains this slow adoption rate. This paper sampled 306 small-scale maize farmers and characterized them based on their willingness to use the dryers. Double bounded choice model was then used to determine farmers’ willingness to pay. The results show that commercial maize production (P- value =0.078, β=13.92958), cooperative membership (P-value=0.053, β=24.40269), higher maize prices (P-value =0.022, β=0.0276285) and subjective norms (P-value=0.005, β=23.75356) positively influenced willingness to pay, while factors like familiarity (P-value=0.044, β=- 34.41718) and liking of the maize dryer (P-value=0.051, β=-16.46909) had a negative impact. The findings emphasize the importance of considering education, farming experience, land size, cooperative membership, access to extension services, and commercial market channels when marketing improved maize dryers. The ideal adopters are farmers with advanced education, years of farming experience, larger land size, cooperative membership, and access to relevant services. To enhance the adoption of improved maize dryers, stakeholders should support farmers in expanding production land, joining cooperatives, accessing extension services, and connecting with commercial maize markets. Additionally, awareness programs targeting older farmers with large households and those lacking post-harvest training may help address factors associated with unwillingness to use improved maize dryers. |
| Keywords: | Farm Management, Research and Development/Tech Change/Emerging Technologies, Teaching/Communication/Extension/Profession |
| Date: | 2024–08–07 |
| URL: | https://d.repec.org/n?u=RePEc:ags:cfcp15:344279 |
| By: | Katherine Hassett; Rose Mba Mebiame; Aline Mortha; Miwa Nakai; Helene Ahlborg; Kavya Michael; Ugur Ozdemir; Ioannis Tikoudis; Nicolina Lamhauge; Olufolahan Osunmuyiwa; Toshi Arimura; Nick Johnstone |
| Abstract: | This paper offers insights on the factors that determine household choices related to energy use, based on data from the third OECD Survey on Environmental Policies and Individual Behaviour Change (EPIC). The analysis profiles households according to patterns in reported energy use and investment in energy-related technologies, assesses the factors driving such decisions and estimates households’ willingness to pay to reduce the emissions of the electricity they use. Results suggest that the feasibility of installing low-emissions energy technologies appears to remain a key obstacle to their uptake, and that households are willing to pay a small but positive premium for electricity produced with fewer emissions. The presence of cross-country differences in behaviours and preferences signals the importance of considering local factors in approaches to energy policies. Environmental concern and environmental motivation increase engagement in sustainable choices, pointing to the cross-cutting relevance of policy efforts to improve environmental knowledge and awareness. |
| Keywords: | energy conservation, energy efficiency, household behaviour, residential energy consumption |
| JEL: | D12 D91 Q40 Q42 Q54 C25 |
| Date: | 2024–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:oec:envaaa:247-en |
| By: | Moritz A. Drupp; Jasper N. Meya; Björn Bos; Simon Disque |
| Abstract: | We study the heterogeneity of preferences regarding the limited substitutability of environmental public goods vis-a-vis private consumption goods and how it affects the economic valuation of environmental public goods. We show theoretically that mean marginal willingness to pay for an environmental public good decreases in society’s mean substitutability preference and increases in the heterogeneity of individual-level substitutability preferences. We then introduce an experimental framework to elicit individual-level substitutability preferences for the first time directly, which we apply to study general population preferences concerning the trade-off between market goods and forest ecosystem services. We estimate preference parameters for almost 1, 500 individuals and document substantial preference heterogeneity. The majority of individual preferences imply a complementary relationship, with a median elasticity of substitution (complementarity) of around 0.4 (2.5). We show that accounting for heterogeneity in substitutability preferences may considerably increase the societal value attached to environmental public goods. These findings are relevant for environmental cost-benefit analysis and for the comprehensive accounting of public natural capital. |
| Keywords: | substitutability, complementarity, heterogeneous preferences, non-market valuation, experiment, donations, public goods, policy appraisal |
| JEL: | Q51 Q56 H41 D64 C99 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11197 |
| By: | Jason R. Blevins |
| Abstract: | Continuous-time formulations of dynamic discrete choice games offer notable computational advantages, particularly in modeling strategic interactions in oligopolistic markets. This paper extends these benefits by addressing computational challenges in order to improve model solution and estimation. We first establish new results on the rates of convergence of the value iteration, policy evaluation, and relative value iteration operators in the model, holding fixed player beliefs. Next, we introduce a new representation of the value function in the model based on uniformization -- a technique used in the analysis of continuous time Markov chains -- which allows us to draw a direct analogy to discrete time models. Furthermore, we show that uniformization also leads to a stable method to compute the matrix exponential, an operator appearing in the model's log likelihood function when only discrete time "snapshot" data are available. We also develop a new algorithm that concurrently computes the matrix exponential and its derivatives with respect to model parameters, enhancing computational efficiency. By leveraging the inherent sparsity of the model's intensity matrix, combined with sparse matrix techniques and precomputed addresses, we show how to significantly speed up computations. These strategies allow researchers to estimate more sophisticated and realistic models of strategic interactions and policy impacts in empirical industrial organization. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.14914 |
| By: | Yonas Alem; John Loeser; Aprajit Mahajan |
| Abstract: | The implications of commonly used money earlier or later (MEL) games for intertemporal behavior depend critically upon subjects’ choice bracketing. If subjects bracket narrowly, responses reflect preferences independent of subjects’ financial environment. Alternatively, if subjects bracket broadly, responses reflect subjects’ marginal returns to investment. We test both hypotheses in a lab-in-the-field experiment, which involves repeated MEL games, a large unconditional cash transfer, and an illiquid savings product. Subjects do not narrowly bracket – randomized cash transfers induce greater patience in MEL choices. Subjects do not broadly bracket either – they fail to arbitrage across equivalent MEL and savings opportunities. We develop a conceptual framework and present evidence that narrowly bracketing subjects drive the predictive power of MEL outcomes for financial choices, providing a rationale for the common practice of interpreting MEL choices as a proxy for time preferences rather than financial environment. |
| JEL: | O10 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32683 |
| By: | Bertolozzi-Caredio, Daniele; Soriano, Barbara; Urquhart, Julie; Vigani, Mauro |
| Abstract: | Understanding how farmers learn and how this influences their decisions is still a key question in research, especially in the context of increasing challenges and uncertainties. We explore whether and how different learning preferences, notably learning by doing, from other farmers and through social media, influence farmers’ risk management (RM) choices. Based on a survey of farmers in Spain and the UK, we employed multivariate probit regressions and Poisson models with instrument variables. We found that all learning preferences are significantly correlated to RM choice, with learning through social media and from peers leading to more strategies adopted by the farmer, and learning by doing leading to fewer strategies. The results, however, show that each learning preference affects different specific RM strategies. Our findings suggest that policymakers should consider leveraging informal learning networks to improve farmers’ RM, whereas policy incentives might be designed to formalize and promote social media use (also by existing extension services) to boost the adoption of RM strategies. |
| Keywords: | Farm Management, Risk and Uncertainty |
| Date: | 2024–07–26 |
| URL: | https://d.repec.org/n?u=RePEc:ags:cfcp15:344372 |
| By: | Yong Li (Renmin University of China); Sushanta K. Mallick; Nianling Wang (Capital University of Economics and Business); Jun Yu (University of Macau); Tao Zeng (Zhejiang University) |
| Abstract: | This paper gives a rigorous justification to the Deviance information criterion (DIC), which has been extensively used for model selection based on MCMC output. It is shown that, when a plug-in predictive distribution is used and under a set of regularity conditions, DIC is an asymptotically unbiased estimator of the expected Kullback-Leibler divergence between the data generating process and the plug-in predictive distribution. High-order expansions to DIC and the effective number of parameters are developed, facilitating investigating the effect of the prior. DIC is used to compare alternative discrete-choice models, stochastic frontier models, and copula models in three empirical applications. |
| Keywords: | AIC; DIC; Expected loss function; Kullback-Leibler divergence; Model comparison; Plug-in predictive distribution |
| JEL: | C11 C52 C25 C22 C32 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:boa:wpaper:202415 |
| By: | Lacey, Lindsey (Allegheny County Department of Human Services); Mishra, Nirajana (Northeastern University); Mukherjee, Priya (University of Wisconsin-Madison); Prakash, Nikhilesh (Stockholm School of Economics); Prakash, Nishith (Northeastern University); Quinn, Diane (University of Connecticut); Sabarwal, Shwetlena (World Bank); Saraswat, Deepak (University of Connecticut) |
| Abstract: | We conducted a randomized control trial to study the impact of two information messages aimed at reducing the stigma associated with mental illness on the willingness to seek mental healthcare among adults in Nepal. The first intervention shares information about the prevalence of mental health issues and the efficacy of treatment. The second intervention shares information about the mental health struggles of a Nepali celebrity and how he benefited from treatment. We find three results. First, compared to a no-information control group, both interventions increase participants' stated willingness to seek mental health treatment. This effect is driven by participants with high personal and anticipated stigma, less severe symptoms of depression and anxiety, and who hold strong beliefs about conformity to masculinity. Second, the impact on participants' stated willingness to seek mental health treatment mirrors their willingness to pay for counseling. Third, participants are, on average, more likely to report willingness to seek help when the enumerator is female. |
| Keywords: | mental health, stigma, prejudice, seeking help, celebrity, Nepal |
| JEL: | I12 I15 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17166 |
| By: | Fernández, Francisco J.; Vásquez-Lavín, Felipe; Rivera, Diego; Hernández, Francisco; Bopp, Carlos; Campos-Requena, Nélyda; Ponce, Roberto D. |
| Abstract: | A tariff is a crucial tool for managing rural water supply services. It helps cover the costs of operation, maintenance, and repair, ensuring the sustainability of these services. Unfortunately, due to suboptimal tariff structures, rural water systems lack the financial liquidity to handle unforeseen events. This puts them in a difficult position, especially with the increasing water demand and resource scarcity driven by climate change. Therefore, adjusting the current tariff settings is necessary to achieve financial and operational sustainability, balancing cost recovery with other social, economic, and environmental objectives. This study aims to determine how pricing components, such as fixed charges and variable costs, influence consumer acceptability of different tariff systems. Using a choice experiment, we evaluated Chilean rural water consumers' preferences for different tariff schemes. The results show that individuals are highly conservative regarding the price structure. Participants preferred maintaining existing tariffs, consistently favoring the status quo over alternative tariff structures. Significantly, the likelihood of selecting a new tariff structure is influenced more by alterations in the variable component than by changes in the fixed price of water. These findings provide valuable insights for achieving a balanced and sustainable approach to rural water management and help policy designs. |
| Keywords: | Community/Rural/Urban Development, Consumer/Household Economics, Demand and Price Analysis |
| Date: | 2024–07–26 |
| URL: | https://d.repec.org/n?u=RePEc:ags:cfcp15:344377 |
| By: | Hendrik Döpper; Alexander MacKay; Nathan H. Miller; Joel Stiebale |
| Abstract: | We characterize the evolution of markups for consumer products in the United States from 2006 to 2019. Using detailed data on prices and quantities for products in more than 100 distinct product categories, we estimate flexible demand systems and recover markups under an assumption that firms set prices to maximize profit. Our empirical strategy obtains a panel of consumer preferences and marginal costs based on the estimation of separate random coefficient models by category and year. We find that markups increased by about 30 percent on average over the sample period. The change is primarily attributable to decreases in marginal costs, as real prices only increased slightly from 2006 to 2019. Our estimates indicate that consumers have become less price sensitive over time. |
| JEL: | D20 D40 L10 L2 L81 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32739 |