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on Discrete Choice Models |
| By: | Davide Luparello |
| Abstract: | This technical note provides comprehensive derivations of fundamental equations in two-level nested and sequential logit models for analyzing hierarchical choice structures. We present derivations of the Berry (1994) inversion formula, nested inclusive values computation, and multi-level market share equations, complementing existing literature. While conceptually distinct, nested and sequential logit models share mathematical similarities and, under specific distributional assumptions, yield identical inversion formulas-offering valuable analytical insights. These notes serve as a practical reference for researchers implementing multi-level discrete choice models in empirical applications, particularly in industrial organization and demand estimation contexts. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2503.21808 |
| By: | Celina Högn; Lea Mayer; Johannes Rincke; Erwin Winkler |
| Abstract: | This paper examines preferences for gender diversity among co-workers. Using stated-choice experiments with 5, 400 PhD students and university students in Germany, we uncover a substantial willingness to pay (WTP) for gender diversity of up to 5% of earnings on average. Importantly, we find that women have a much higher WTP for gender diversity than men. While the WTP differs by career ambition, competitiveness, and family preferences, we find that gender differences in traits and preferences cannot explain gender differences in the WTP for diversity. Our findings provide an explanation for differential sorting of men and women into high-profile jobs based on the share of female co-workers. |
| Keywords: | gender diversity, gender differences, preferences, willingness to pay, stated choice experiment |
| JEL: | J16 J24 J31 J33 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11732 |
| By: | Andrea Diem; Christian Gschwendt; Stefan C. Wolter |
| Abstract: | A university degree is a risky investment because of the non-negligible risk of having to drop out of university without graduating. However, the costs of this risk are controversial, as it is often argued that even an uncertified year of study has a value in the labor market. To determine this value causally, however, alternatives to studying must also be considered, which is done here with the help of a discrete choice experiment with a representative sample of over 2, 500 HR recruiters. The result is that dropping out of university with a major closely related to an advertised job leads to similar labor market outcomes as if someone had not studied at all. Without a direct link to a job, however, dropping out of university significantly reduces lifetime earnings. Furthermore, HR recruiters clearly prefer applicants who have used the years without studying for human capital accumulation in an alternative way, for example in the form of a traineeship. |
| Keywords: | dropouts, hiring decisions, discrete choice experiment, sheepskin effect, willingness to pay, tertiary education |
| JEL: | I26 J23 J24 J31 M51 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11688 |
| By: | Christopher P. Chambers; Yusufcan Masatlioglu; Kemal Yildiz |
| Abstract: | We introduce a novel perspective by linking ordered probabilistic choice to copula theory, a mathematical framework for modeling dependencies in multivariate distributions. Each representation of ordered probabilistic choice behavior can be associated with a copula, enabling the analysis of representations through established results from copula theory. We provide functional forms to describe the "extremal" representations of an ordered probabilistic choice behavior and their distinctive structural properties. The resulting functional forms act as an "identification method" that uniquely generates heterogeneous choice types and their weights. These results provide valuable tools for analysts to identify micro-level behavioral heterogeneity from macro-level observable data. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2504.01227 |
| By: | Jeffrey Mensch |
| Abstract: | When is random choice generated by a decision maker (DM) who is Bayesian-persuaded by a sender? In this paper, I consider a DM whose state-dependent preferences are known to an analyst, yet chooses stochastically as a function of the state. I provide necessary and sufficient conditions for the dataset to be consistent with the DM being Bayesian persuaded by an unobserved sender who generates a distribution of signals to ex-ante optimize the sender's expected payoff. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2504.01829 |
| By: | Robert Metcalfe; Sefi Roth |
| Abstract: | Exposure to ambient air pollution has been shown to be detrimental to human health and productivity, and has motivated many policies to reduce such pollution. However, given that humans spend 90% of their time indoors, it is important to understand the degree of exposure to Indoor Air Pollution (IAP), and, if high, ways to reduce it. We design and implement a field experiment in London that monitors households' IAP and then randomly reveals their IAP in real-time. At baseline, we find that IAP is worse than ambient air pollution when residents are at home and that for 38% of the time, IAP is above World Health Organization standards. Additionally, we observe a large household income-IAP gradient, larger than the income-ambient pollution gradient, highlighting large income disparities in IAP exposure. During our field experiment, we find that the randomized revelation reduces IAP by 17% (1.9 ug/m3) overall and 34% (5 ug/m3) during occupancy time. We show that the mechanism is households using more natural ventilation as a result of the feedback (i.e., opening up doors and windows). Finally, in terms of welfare, we find that: (i) households have a willingness to pay of 4.8 pounds (6 dollars) for every 1 ug/m3 reduction in indoor PM2.5; (ii) households have a higher willingness to pay for mitigation than for full information; (iii) households have a price elasticity of IAP monitor demand around -0.75; and (iv) a 1 pound subsidy for an IAP monitor or an air purifier has an infinite marginal value of public funds, i.e., a Pareto improvement. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:feb:framed:00819 |
| By: | Raffaele Berzi; Daniela Bubboloni; Michele Gori |
| Abstract: | We study the manipulability of social choice correspondences in situations where individuals have incomplete information about others' preferences. We propose a general concept of manipulability that depends on the extension rule used to derive preferences over sets of alternatives from preferences over alternatives, as well as on individuals' level of information. We then focus on the manipulability of social choice correspondences when the Kelly extension rule is used, and individuals are assumed to have the capability to anticipate the outcome of the collective decision. Under these assumptions, we introduce some monotonicity properties of social choice correspondences whose combined satisfaction is sufficient for manipulability, prove a result of manipulability for unanimous positional social choice correspondences, and present a detailed analysis of the manipulability properties for the Borda, the Plurality and the Negative Plurality social choice correspondences. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2503.23141 |
| By: | N. S. Gonchar |
| Abstract: | The state of economic theory and accumulated facts from the different branches of the economic science require to analyze the concept of the description of economy systems. The economic reality generates the problems the solution of that is only possible by a new paradigm of the description of economy system. The classical mathematical economics is based on a notion of the rational consumer choice generated by a certain preference relation on some set of goods a consumer wanted and the concept of maximization of the firm profit. The sense of the notion of the ratio- nal consumer choice is that it is determined by a certain utility function, defining the choice of a consumer by maximization of it on a certain budget set of goods. More- over, choices of consumers are independent. In the reality choices of consumers are not independent because they depend on the firms supply. Except the firms supply, the consumer choice is also determined by information about the state of the economy system that the consumer has and respectively eval- uates at the moment of the choice. In turn, the firms supply is made on the basis of needs of the consumers and their buying power. By information about the state of the economy system we understand a certain information about the equilibrium price vector and productive processes realized in the economy system under the equilibrium price vector. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2503.24257 |
| By: | Nie, Zihan (Beijing Normal University, China); Jiang, Yu (Southwestern University of Finance and Economics, China.); Salazar, César (University of Bío-Bío, Chile); Jaime, Marcela (University of Concepción, Chile.); Ho, Thong (University of Economics Ho Chi Minh City, Vietnam.) |
| Abstract: | Harmful algal blooms (HAB) are an increasing global threat to food safety in the seafood industry. The impact of HABs and the losses from policies addressing them are significant. However, little is known regarding the extent to which the perceived risk of HAB affects consumers' preferences for seafood products and how this translates into welfare losses from the demand side. In this paper, we conducted choice experiments in Chile, China, and Vietnam to explore consumers’ preferences for reducing the risk of HAB contamination in a mussel consumption framework. We find that consumers strongly prefer a test that eliminates the risk of purchasing mussels contaminated by the HAB on the market in all three countries. These strong preferences translate into large WTPs. Perceptions towards HAB and mussel’s attributes play a role in explaining heterogeneity in consumers’ preferences. However, the link between perceptions and preferences varies across countries, possibly due to country-specific contexts. These results imply that the increasing occurrence of HAB globally might have caused sizable welfare losses for consumers and that policies to ensure food safety in seafood markets could significantly improve social welfare. |
| Keywords: | mussel aquaculture; harmful algal bloom; choice experiment; consumers’ preferences |
| JEL: | Q22 Q51 Q53 |
| Date: | 2025–04–09 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:gunefd:2025_001 |
| By: | Devos, Louise (Ghent University); Lippens, Louis (Ghent University); Claus, Dagmar (Ghent University); Baert, Stijn (Ghent University) |
| Abstract: | Regional mobility is crucial for addressing labour shortages, as jobseekers from one region may fill vacancies in another region with few local candidates. However, this requires a willingness amongst employers to consider candidates from across regional borders. This study examines the influence of regional identity on hiring decisions in the Belgian labour market, focusing on perceptions of Flemish recruiters towards Flemish and Walloon candidates. Through a state-of-the-art vignette experiment, genuine Flemish recruiters evaluated fictitious resumes of school leavers that signalled regional identity through their name, place of birth, residential address, secondary school location, and/or language proficiency. Walloon candidates consistently score lower on key hiring metrics. Structural equation modelling reveals that Flemish employers hold negative perceptions of Walloon candidates, particularly regarding availability, interpersonal competency, attitude, and willingness of employers, employees, and clients to cooperate with them. These findings highlight the persistent role of regional identity stereotypes in reinforcing labour market inequalities and impeding mobility as a strategy to mitigate labour market tightness. |
| Keywords: | perceptions, culture, regional mobility, labour market, discrimination, Belgium |
| JEL: | J61 J68 J71 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17855 |
| By: | Riedl, Arno (Maastricht University); Schmeets, Hans (Maastricht University); Werner, Peter (Maastricht University) |
| Abstract: | Using an artefactual field experiment, we elicit revealed preferences for solidarity of different age groups toward the same and other age groups among a large, diverse Dutch population sample. Preferences are measured with a solidarity game and linked to a unique administrative database, allowing exploration of demographic and socio-economic correlates. In the game, a winner of a money amount is asked ex-ante how much they are willing to transfer to a loser who gets nothing. Participants, on average, show a strong preference for ex-ante solidarity, willing to transfer about 40% of the money. However, participants are overly pessimistic about what others will transfer. We also observe age-based discrimination, as many show stronger solidarity with their own age group. Using questionnaires, we measure stated preferences in various domains and find revealed preferences correlate with some self-reported attitudes and with opinions on social security and solidarity-related field behavior. |
| Keywords: | social security systems, group identity, age groups, solidarity, large population sample |
| JEL: | D63 D64 D91 C93 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17858 |
| By: | Alice Pizzo; Christina Gravert; Jan M. Bauer; Lucia Reisch |
| Abstract: | We examine the impact of a carbon tax on consumer choices via a large-scale online randomized controlled trial. Higher taxes generally reduce the demand for high-carbon goods. Compared to an import tax, a carbon tax reduces demand when the tax is zero (i.e., announced but not levied) but leads to relatively higher demand for high-carbon goods when a positive tax is introduced. This contradiction of basic price theory is entirely driven by climate-concerned consumers. Our findings suggest that carbon taxes can crowd out climate concerns, leading to important implications for policy. |
| Keywords: | behavioral response, carbon pricing, climate change, climate policy, experiment, moral licensing |
| JEL: | Q58 C90 D03 D90 Q50 Q51 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11719 |
| By: | Takeshi Fukasawa |
| Abstract: | This study empirically investigates firms' incentives on the choice of product durability, and its social optimality, by developing a dynamic structural model of durable goods with forward-looking consumers and oligopolistic multi-product firms. Based on the observations of the light bulb market, it specifies a model where firms produce multiple products with different durability levels and set product prices based on dynamic incentives. It proposes and applies novel estimation algorithms that alleviate the computational burden and data requirement for estimating demand and marginal cost parameters of dynamic demand models. Using light bulb market data in Japan, structural parameters are estimated. This study obtains the following results. First, large firms have incentives to collude to eliminate high durability incandescent lamps, though it is profitable to sell them for each firm. In contrast, when they can collude on prices, they don't have incentives to eliminate high durability bulbs. Second, eliminating high durability incandescent lamps leads to larger producer and total surplus, though it leads to lower consumer surplus. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2503.23792 |