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on Discrete Choice Models |
| By: | Vasudha Chopra (Plaksha University); Christian A. Vossler (Department of Economics, University of Tennessee) |
| Abstract: | Researchers deploying stated preference surveys to elicit monetary valuations for public goods commonly use techniques devised to reduce bias in hypothetical choice settings. This practice is conceptually at odds with accumulated evidence that most survey respondents instead perceive that their decisions have economic consequences (i.e., affect their future welfare). We examine three bias reduction procedures in both hypothetical choice and incentive compatible, real payment settings: cheap talk, solemn oath, and certainty adjustment. While we find that the oath reduces willingness to pay (WTP) in a hypothetical setting, the oath instead increases WTP by over 30% in a consequential setting. Cheap talk does not alter mean WTP in a consequential setting but leads to a stark difference in WTP across sexes. Applying the common rules for ex post adjustment of choices based on stated response certainty leads to significant and large decreases in WTP estimates for both hypothetical and consequential cases. Our results suggest that survey researchers should make use of screening questions to better target hypothetical bias reduction techniques to only those prone to bias. |
| Keywords: | hypothetical bias, consequentiality, stated preferences, experiments, solemn oath, cheap talk, certainty adjustment |
| JEL: | C92 D82 D9 H41 Q51 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:ten:wpaper:2024-03 |
| By: | Thomas Demuynck; Tom Potoms; Morgane Rigaux |
| Abstract: | We introduce a behavioural condition, called choice dominance, which (partially) ranks individuals based on their consumption of a certain good. The notion is equivalent to a single crossing restriction on the indifference curves of the individuals. We provide a revealed preference condition, called X-GARP, to test for choice dominance and we incorporate the notion into a household framework to obtain testable restrictions on the change in household demand after an increase in the reservation utility for one of the household members. We apply our fundings to an experimental dataset and a budget survey from a conditional cash transfer programme. |
| Keywords: | Choice dominance, Single crossing indifference curves, Revealed preferences, Conditional cash transfers |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:eca:wpaper:2013/384800 |
| By: | Fernando Payr\'o; Evan Piermont |
| Abstract: | We consider an analyst whose goal is to identify a subject's utility function through revealed preference analysis. We argue the analyst's preference about which experiments to run should adhere to three normative principles: The first, Structural Invariance, requires that the value of a choice experiment only depends on what the experiment may potentially reveal. The second, Identification Separability, demands that the value of identification is independent of what would have been counterfactually identified had the subject had a different utility. Finally, Information Monotonicity asks that more informative experiments are preferred. We provide a representation theorem, showing that these three principles characterize Expected Identification Value maximization, a functional form that unifies several theories of experimental design. We also study several special cases and discuss potential applications. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.11625 |
| By: | Andersson Järnberg, Linda (Örebro University School of Business); Andrén, Daniela (Örebro University School of Business); Börjesson, Maria (Linköping University); Hultkrantz, Lars (Örebro University School of Business); Rutström, Elisabet (Örebro University School of Business); Vimefall, Elin (Örebro University School of Business) |
| Abstract: | This study analyzes how the willingness to pay (WTP) for a risk reduction for traffic accidents varies depending on the specific traffic safety measures and whether they are framed as public or private goods. Building on previous studies, we designed and conducted a contingent valuation survey targeting a representative sample of the Swedish population, assessing WTP for eight different measures aimed at increasing the safety of vulnerable road users. Our findings reveal that while keeping the risk reduction constant, WTP is higher for well-established traffic safety measures, such as anti-slip treatments and improved lighting. Conversely, new technologies, like mobile apps and sensors, elicit lower WTP. However, respondents express a higher WTP when these technological measures are provided as a public good. These results suggest that acceptance and perceived reliability of the measures significantly influence WTP. The findings have important implications for cost-benefit analyses and evidence-based policymaking in transportation safety, particularly regarding the implementation of new technology in road safety infrastructure. |
| Keywords: | traffic safety; willingness to pay; public good; private good; infrastructure; bicyclists and pedestrians; interval regression |
| JEL: | D12 H41 R41 |
| Date: | 2024–12–10 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:oruesi:2024_011 |
| By: | Tiziana Assenza (Toulouse School of Economics, IAST); Alberto Cardaci (Toptal); Stefanie Huber (University of Bonn) |
| Abstract: | The proliferation of fake news poses a growing global threat, affecting politics, individual decision-making, and economic outcomes. This column discusses how informing individuals about their susceptibility to fake news affects their willingness to pay to protect themselves from misinformation. While people often overestimate their ability to discern fake news, raising awareness about their susceptibility affects – causally and positively – their willingness to pay to protect themselves from the adverse consequences of fake news, such as by investing in fact-checking services. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkpbs:065 |
| By: | Christian Belzil (CREST, CNRS, Paris Polytechnic Institute, IZA, and CIRANO); Tomáš Jagelka (University of Bonn, Dartmouth College, CREST-Ensae, and IZA) |
| Abstract: | We develop a framework for accounting for individuals’ effort and cognitive noise which confound estimates of preferences based on observed behavior. Using a large-scale experimental dataset we estimate that failure to properly account for decision errors due to (rational) inattention on a more complex, but commonly used, task design biases estimates of risk aversion by 50% for the median individual. Effort propensities recovered from preference elicitation tasks generalize to other settings and predict performance on an OECD-sponsored achievement test used to make international comparisons. Furthermore, accounting for endogenous effort allows us to empirically reconcile competing models of discrete choice. |
| Date: | 2024–11–19 |
| URL: | https://d.repec.org/n?u=RePEc:crs:wpaper:2024-13 |
| By: | Bernard M.S. van Praag (University of Amsterdam); J. Peter Hop (Independent); William H. Greene (University of South Florida) |
| Abstract: | In the last few decades, the study of ordinal data in which the variable of interest is not exactly observed but only known to be in a specific ordinal category has become important. In Psychometrics such variables are analysed under the heading of item response models (IRM). In Econometrics, subjective well-being (SWB) and self-assessed health (SAH) studies, and in Marketing Research, Ordered Probit, Ordered Logit, and Interval Regression models are common research platforms. To emphasize that the problem is not specific to a specific discipline we will use the neutral term coarsened observation. For single-equation models estimation of the latent linear model by Maximum Likelihood (ML) is routine. But, for higher -dimensional multivariate models it is computationally cumbersome as estimation requires the evaluation of multivariate normal distribution functions on a large scale. Our proposed alternative estimation method, based on the Generalized Method of Moments (GMM), circumvents this multivariate integration problem. The method is based on the assumed zero correlations between explanatory variables and generalized residuals. This is more general than ML but coincides with ML if the error distribution is multivariate normal. It can be implemented by repeated application of standard techniques. GMM provides a simpler and faster approach than the usual ML approach. It is applicable to multiple equation models with K-dimensional error correlation matrices and kJ response categories for the the kth equation. It also yields a simple method to estimate polyserial and polychoric correlations. Comparison of our method with the outcomes of the Stata ML procedure cmp yields estimates that are not statistically different, while estimation by our method requires only a fraction of the computing time. |
| Keywords: | ordered qualitative data, item response models, multivariate ordered probit, ordinal data analysis, generalized method of moments, polychoric correlations, coarsened events |
| JEL: | C13 C15 C24 C25 C26 C33 C34 C35 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:usf:wpaper:2024-06 |
| By: | Justin Tyndall (University of Hawai'i) |
| Abstract: | The provision of public transportation can improve the accessibility of work opportunities. However, predicting the labor market effects of new transit infrastructure is difficult because of endogenous worker decisions. I examine a large public-transit rail project on the island of Oahu, Hawaii. Using block-level commuter-flow and travel-time estimates, I propose and estimate a quantitative spatial model of location and mode choice for workers. I estimate that the new rail system increases public-transit-mode share and the employment rate but does not reduce the average commute duration, because of endogenous worker sorting. Low-income workers on Oahu capture a significant share of transit’s direct benefits because of their relative preference for both transit and the neighborhoods served by rail. |
| Keywords: | transportation, transit, residential choice, neighborhood change, spatial mismatch |
| JEL: | J20 J60 R13 R23 R40 R58 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:upj:weupjo:24-409 |