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on Discrete Choice Models |
| By: | Ota, Yuta; Otsu, Taisuke |
| Abstract: | This paper proposes a Hausman-type statistic to the test specification of a parametric binary choice model by comparing the maximum likelihood estimator and the maximum score estimator. Although the convergence rates are different, it is still meaningful to compare these estimators to detect misspecification of parametric models. A simulation study illustrates that the proposed test offers better size properties than the conventional information matrix test, and exhibits reasonable power against common forms of misspecification, such as heavy-tailed distributions and heteroskedasticity. |
| Keywords: | binary choice; cube root asymptotics; maximum score; specification testing |
| JEL: | J1 |
| Date: | 2026–05–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137590 |
| By: | Josephine Auer |
| Abstract: | Hedonic models value goods through their characteristics but are typically interpreted under time-separable preferences. This assumption is restrictive: when some attributes are habit forming, observed prices reflect both contemporaneous utility and continuation values from past consumption. I develop a nonparametric revealed preference framework for dynamic hedonic valuation, deriving necessary and sufficient conditions for rationalisability over characteristics. The framework separates restrictions imposed by the hedonic price system from those imposed by intertemporal choice and provides diagnostics that quantify the severity of violations along each margin. Applied to household scanner data, I show that most failures of static hedonic valuation reflect violations of the hedonic price structure; conditional on satisfying this structure, allowing for habit formation improves behavioural fit. This alters the mapping from prices to willingness-to-pay and the implied welfare interpretation. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.02456 |
| By: | Ambler, Kate; Bakhtiar, M. Mehrab; Bloem, Jeffrey R.; Uddin, Mohammad Riad |
| Abstract: | In places such as rural Bangladesh, cash is the dominant medium for payments despite potential benefits of digital payments. We offer survey respondents an incentive-compatible choice for compensation: 200 Taka cash or randomly varied mobile money amounts (200-400 Taka). Only eight percent chose digital payment at parity and respondents exhibit an average willingness-to-pay of 43 percent of the payment value to receive cash payment. This preference persists across demographics, including among mobile money account holders. Within-household analysis reveals that 77 percent of the effect stems from individual-level rather than household-level factors, highlighting the importance of demand-side barriers on digital payments. |
| Keywords: | rural areas; payment agreements; consumer behaviour; smartphones; digital technology; willingness to pay; Bangladesh; Asia; Southern Asia |
| Date: | 2025–12–16 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:gsspwp:178890 |
| By: | Ambler, Kate; Bakhtiar, M. Mehrab; Bloem, Jeffrey R.; Uddin, Mohammad Riad |
| Abstract: | In places such as rural Bangladesh, cash is the dominant medium for payments despite potential benefits of digital payments. We offer survey respondents an incentive-compatible choice for compensation: 200 Taka cash or randomly varied mobile money amounts (200-400 Taka). Only eight percent chose digital payment at parity and respondents exhibit an average willingness-to-pay of 43 percent of the payment value to receive cash payment. This preference persists across demographics, including among mobile money account holders. Within-household analysis reveals that 77 percent of the effect stems from individual-level rather than household-level factors, highlighting the importance of demand-side barriers on digital payments. |
| Keywords: | rural areas; payment agreements; consumer behaviour; smartphones; digital technology; willingness to pay; Bangladesh; Southern Asia |
| Date: | 2025–12–16 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:ifprid:178890 |
| By: | Minoru Osawa |
| Abstract: | We introduce the sampling logit equilibrium (SLE), a stationary concept for population games in which agents evaluate actions using a finite sample of opponents' plays and respond according to a logit choice rule. This framework combines informational frictions from finite sampling with stochastic choice. When the sample size is large, SLE is well approximated by a logit equilibrium of a virtual game whose payoffs incorporate explicit distortion terms generated by sampling noise. Examples illustrate how finite sampling can systematically shift equilibrium behavior and generate equilibrium selection effects. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.09539 |
| By: | Wayne Yuan Gao; Ming Li; Zhengyan Xu |
| Abstract: | We develop a tractable identification approach for strategic network formation models with both strategic link interdependence and individual unobserved heterogeneity (fixed effects). The key challenge is that endogenous network statistics (e.g. number of common friends) enter the link formation equation, while the mapping from model primitives to equilibrium network structure is generally intractable. Our approach sidesteps this difficulty using a ``bounding-by-$c$'' technique that treats endogenous covariates as random variables and exploits monotonicity restrictions to obtain identifying information. We derive a system of identifying restrictions based on subnetwork configurations: tetrad-based restrictions that completely eliminate all individual fixed effects, triad-based restrictions that partially difference out fixed effects, and general weighted cycle-based restrictions, along with point identification results. Preliminary simulations show that our approach can deliver informative bounds on the structural parameters. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.08634 |
| By: | Chris Engh |
| Abstract: | This paper points out that rational inattention is a nested regularized optimal transport problem. We use entropic optimal transport to establish the main results in Matejka and McKay (2015) and Caplin, Dean, and Leahy (2019) and extend them to arbitrary choice sets. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.15548 |
| By: | B. Douglas Bernheim; Aldo Lucia; Kirby Nielsen; Charles D. Sprenger |
| Abstract: | We evaluate three methods for identifying improvable choices: documenting specific misconceptions (the Characterization Assessment method), gauging confidence in choices (the Decision Confidence method), and showing that specific behavioral patterns in the domain of interest also emerge in a related domain where they are objectively suboptimal (the Pattern Matching method). In experiments involving risky choice, the three methods imply that different choices are improvable and have conflicting implications regarding legitimate risk preferences. We clarify the assumptions underlying each method and reevaluate the evidence on risk-taking in light of their limitations. |
| JEL: | D1 D60 D90 D91 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34979 |
| By: | Emanuele Borgonovo; An Chen; Massimo Marinacci; Shihao Zhu |
| Abstract: | We study continuous-time portfolio choice with nonlinear payoffs under smooth ambiguity and Bayesian learning. We develop a general framework for dynamic, non-concave asset allocation that accommodates nonlinear payoffs, broad utility classes, and flexible ambiguity attitudes. Dynamic consistency is obtained by a robust representation that recasts the ambiguity-averse problem as ambiguity-neutral with distorted priors. This structure delivers explicit trading rules by combining nonlinear filtering with the martingale approach and nests standard concave and linear-payoff benchmarks. As a leading application, delegated management with convex incentives illustrates that ambiguity aversion shifts beliefs toward adverse states, limits the range of states that would otherwise trigger more aggressive risk taking, and reduces volatility through lower risky exposure. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.08552 |
| By: | Uzi Segal (Boston College); Zhuzhu Zhou (Xiamen University) |
| Abstract: | In a social choice setting, individuals may be unwilling to aggregate their preferences with what they regard as wrong preferences held by others because they lead to outcomes that harm themselves, harm others, are socially inefficient, or are morally unacceptable. People may still be willing to compromise with those who believe that although such preferences are wrong, society should nonetheless accept them. We offer two methods of two-level aggre- gation for such situations. In the first method, each member of society first aggregates the “corrected” individual preferences, and society then aggregates these aggregated views. In the second method, for each person, society first aggregates everyone’s views about that person’s preferences, and then aggregates the resulting individual “corrected” preferences. If these two methods yield the same social ranking, then the aggregation rule must be the sum of functions of the corrected utilities. |
| Keywords: | Social welfare function; aggregation rule; spurious unanimity |
| JEL: | D70 D30 D60 |
| Date: | 2026–03–16 |
| URL: | https://d.repec.org/n?u=RePEc:boc:bocoec:1108 |
| By: | Yue Cao (The Chinese University of Hong Kong, Shenzhen); Judith A. Chevalier (Yale University and NBER); Jessie Handbury (University of Pennsylvania and NBER); Hayden Parsley (University of Texas at Austin); Kevin R. Williams (Yale University and NBER) |
| Abstract: | Economists often use variation in consumersÕ distance from services as a source of demand variation. This approach typically treats consumer-supplier distance as exogenous, despite suppliers strategically choosing locations. We develop a novel class of instruments to address this endogeneity. These instruments exploit the spatial distribution of consumer demographics and can be constructed from standard cross-sectional data, making them useful in a variety of spatial applications. Our preferred instruments use the income composition of concentric discs centered on the Central Business District. Applying these instruments to smartphone geolocation data for millions of devices across 18 metropolitan areas, we estimate consumer preferences for general merchandise chains across income groups. We show that accounting for distance endogeneity significantly alters willingness-to-travel estimates, distorting welfare conclusions. Contrary to a prevailing Òretail apocalypseÓ narrative, consumer surplus per trip remained stable from 2010 to 2019. Ignoring endogeneity falsely suggests substantial welfare declines for lower-income households. |
| Date: | 2026–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2508 |
| By: | Avner Seror |
| Abstract: | We propose a Random Rule Model (RRM) in which behavior is generated by switching among a small library of transparent, parameter-free decision rules. A differentiable gate learns environment-dependent rule propensities, producing an interpretable mixture over named procedures. We develop a global identification theory based on two verifiable conditions on the observed support. Applied to 10, 000 binary lottery problems, rule-gating substantially outperforms structured neural benchmarks based on expected utility and prospect theory, approaching the most flexible benchmark while remaining highly restrictive under permutation-fit tests, and retains predictive content on an independent dataset. Mechanism diagnostics reveal that extreme-outcome screening, salience, and attention rules carry the largest responsibility weights, with systematic shifts along tradeoff complexity and dispersion asymmetry. Robustness checks confirm that the findings are not driven by the ex-ante library choice, marginal dominance relationships, or the availability of additional regressors. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.04105 |
| By: | Fernando Delbianco |
| Abstract: | Instrumental variable (IV) methods rely critically on the exclusion restriction, which is untestable in exactly-identified models under standard assumptions. We propose a framework combining IV analysis with the LiNGAM method to test this restriction by exploiting non-Gaussianity in the data. Under non-Gaussian structural errors, the exclusion violation parameter is point-identified without additional instruments. Five complementary tests (bootstrap percentile, asymptotic normal, permutation, likelihood ratio, and independence-based) are introduced to assess the restriction under varying data conditions. Monte Carlo simulations and an empirical application to the Card (1995) dataset demonstrate controlled Type I error rates and reasonable power against economically relevant violations. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.13505 |
| By: | Jappelli, Tullio; Savoia, Ettore; Sciacchetano, Alessandro |
| Abstract: | We elicit the intertemporal Marginal Propensity to Consume (iMPC) based on hypothetical different size lottery winnings through questions in the Italian Survey of Consumer Expectations (ISCE). Survey respondents were asked to allocate three hypothetical lottery winnings (€1, 000, €10, 000, and €50, 000) between consumption and saving in both the year following the survey and over the longer term. We find that the iMPC of a €1, 000 win declines from about 28 % in the first year to less than 3 % in the fourth year. The impacts of large shocks are more persistent (between 16 % and 19 %) and drop to less than 4 % in the fifth year. The iMPC shows a weak negative relation to the cash-on-hand amount and a negative relation to income risk. Calibrated simulations of incomplete market models with borrowing constraints, income risk, and household heterogeneity are broadly consistent with these empirical findings. |
| Keywords: | income shocks; intertemporal marginal Propensity to Consume; shock size |
| JEL: | D12 D14 C99 |
| Date: | 2026–03–09 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137682 |
| By: | Marcos Lacasa-Cazcarra |
| Abstract: | We study the employment effects of the 22% increase in the Spanish minimum wage in 2019, focusing on young workers. Using census-grade administrative tax data covering the universe of formal wage bills and employment (Models 190/390 linked to personal income tax records), we construct several measures of treatment intensity, including two structurally grounded bite indicators based on the incidence of young minimum-wage workers and the implied increase in the wage bill obtained via Exponential Tilting. Difference-in-differences estimates with two-way fixed effects, dynamic event-study specifications, and robust confidence intervals from the HonestDiD framework all point to the same conclusion: the reform did not generate net disemployment effects for young workers. Point estimates of the elasticity are small and often positive, and confidence internals comfortably include zero even with sizable deviations from parallel trends. A triple-difference design exploiting pre-existing tourism dependence further shows that the sharp employment collapse of 2020 is primarily explained by the COVID-19 shock operating through tourism-intensive sectors, rather than by the minimum-wage hike itself. Our results suggest that, in the macroeconomic and institutional environment prevailing in Spain in 2019, with the minimum wage rising to around 60% of the average wage in a recovering economy, the labour market absorbed a large discrete increase in the wage floor without destroying aggregate youth employment. More broadly, the paper highlights how the choice of treatment definition, the use of census-grade data, robust DiD inference, and explicit modelling of concurrent shocks can shape conclusions about the effects of minimum-wage policies. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.20809 |
| By: | Chihiro Shimizu |
| Abstract: | This paper develops a spatial extension of Becker's theory of time allocation, building on the generalized household-production framework of Schreyer and Diewert (2014). Households allocate time across market labor, household work, home leisure, and external leisure at three locations: home, workplace, and amenity venues. Commuting lowers the effective time endowment; leisure travel raises the full price of external leisure. The shadow price of leisure is bounded by min{wrS, w}, extending the result of Schreyer and Diewert (2014) to a spatial setting. I derive a spatial full-income identity, equilibrium rent gradients with respect to eight parameters, second-order properties of the rent function, and connect to superlative index theory through a Regional Utility Index. An econometric framework for four corner-solution regimes maps the model into observable data. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:tcr:wpaper:e226 |