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on Discrete Choice Models |
| By: | Yurko, Anna |
| Abstract: | This paper studies the relationship between consumer incomes and ages of the durable goods consumed. At the household level, it presents evidence from the Consumer Expenditure Survey of a negative correlation between incomes and ages of the vehicles owned. At the aggregate level, it constructs a dynamic, heterogeneous agents, discrete choice model, to study the relationship between the distribution of consumer incomes and the distribution of vehicle vintages. The model's parameters are calibrated to match vehicle ownership data for 2001. The moments of the income distribution are then varied to generate predictions for mean and median ages of vehicles. The model predicts that higher levels of income inequality lead to older vehicle stocks. If the initial incomes are low, increasing mean income may lead to the aging of vehicles by encouraging entry of lower income consumers into vehicle ownership via purchases of older vehicles. Beyond a certain income level, however, economies with higher mean incomes have younger vehicle stocks. |
| Keywords: | income distribution; motor vehicles; heterogeneous agents models; intertemporal consumer choice; discrete choice |
| JEL: | D12 D91 E21 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8849&r=dcm |
| By: | Yurko, Anna |
| Abstract: | The average age of vehicles in the US has increased by more than 40 percent since the early 1960s. Over the same time period, consumer incomes on average have been growing faster than prices of new vehicles. This paper asks whether greater affordability of vehicles and the resulting increase in vehicle ownership among lower-income consumers can explain some of the aging of vehicles in the US. Consumers with lower incomes are more likely to purchase used vehicles and hold on to them longer, so their decisions affect the age composition of the vehicle population. I evaluate this hypothesis using a dynamic, non-stationary, heterogeneous agents model, with consumer incomes and prices of new vehicles growing over time at the rates calibrated from the data. The agents in the model buy and sell both new and used vehicles. These vehicles are differentiated by age-dependent quality (high, medium and low), with the assumption that older vehicles are more likely to be of poorer quality. The prices of used vehicles depend on their quality level and are allowed to change over time at endogenous rates. The estimated model predicts a significant increase in the average age of vehicles from 1967 to 2001. The conclusion is that consumer incomes are an important factor in vehicle ownership decisions, including the ages of vehicles held, and changes in incomes have contributed to the aging of the vehicle stock in the US. |
| Keywords: | motor vehicles; heterogeneous agents models; intertemporal consumer choice; discrete choice |
| JEL: | D11 D91 E21 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8850&r=dcm |
| By: | Howard Margolis |
| Abstract: | Levine & Palfrey's (2007) QRE account of turnout in large elections raises the broader question of how much of a departure from standard rational choice theory is justified by the considerable repertoire of rational choice anomalies that has accumulated since Downs and Olson half a century ago. An alternative but more controversial unconventional view turns on what I call NSNX motivation to account for how agents seek a balance between self-interest and social motivation. NSNX agents have irreducibly dual utility functions. QRE agents have a standard utility function but they do not maximize it. I review the situation showing why in situations where NSNX effects could be expected, QRE might mirror those effects. I show how by varying parameters of an experiment we can cleanly distinguish between actual QRE effects which should bring predictions closer to the data than Nash and NSNX effects which should do the same. |
| Keywords: | rational choice, NSNX |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:har:wpaper:0717&r=dcm |