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on Discrete Choice Models |
| By: | António Menezes; José Vieira |
| URL: | http://d.repec.org/n?u=RePEc:ekd:002721:272100063&r=dcm |
| By: | Mikolaj Czajkowski (University of Warsaw, Faculty of Economic Sciences, Warsaw Ecological Economics Center, Poland); Anna Barczak (University of Warsaw, Faculty of Economic Sciences, Warsaw Ecological Economics Center, Poland); Wiktor Budzinski (University of Warsaw, Faculty of Economic Sciences, Warsaw Ecological Economics Center, Poland; University of Warsaw, Faculty of Economic Sciences, Warsaw Ecological Economics Center, Poland); Marek Giergiczny (University of Warsaw, Faculty of Economic Sciences, Warsaw Ecological Economics Center, Poland); Nick Hanley (School of Geography and Sustainable Development, University of St. Andrews) |
| Abstract: | The assumption of the stability of preferences is a fundamental one in the theory of the consumer. Many papers within the stated preferences literature have tested this assumption, and have found mixed results. Individuals may become more sure of their preferences as they repeat a valuation task or purchase decision; they may also learn more about prices and quantities of substitutes or complements over time, or about other relevant characteristics of both the good being valued and alternatives in their choice sets. In this paper, we test for the stability of preferences and willingness to pay for attributes of forest management both within and between samples. The within-sample test compares a set of responses from individuals over the sequence of a survey; the between-sample test compares responses from the same people over a period of 6 months. We find that respondents’ preferences differ more within a sample (comparing their first 12 with their second 12 choices) than across samples. This may imply that preference learning and/or fatigue effects within choice experiments are more important than changes in preferences over time in this data. |
| Keywords: | preference stability, test-retest, discrete choice experiments, contingent valuation, stated preferences, forestry |
| JEL: | D01 H4 Q23 Q51 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:sss:wpaper:201406&r=dcm |
| By: | Morten Marott Larsen |
| URL: | http://d.repec.org/n?u=RePEc:ekd:002836:283600052&r=dcm |
| By: | Apostolos Serletis (University of Calgary); Maksim Isakin |
| Abstract: | We address the estimation of stochastic volatility demand systems. In particular, we relax the homoscedasticity assumption and instead assume that the covariance matrix of the errors of demand systems is time-varying. Since most economic and fiÂ…nancial time series are nonlinear, we achieve superior modeling using parametric nonlinear demand systems in which the unconditional variance is constant but the conditional variance, like the conditional mean, is also a random variable depending on current and past information. We also prove an important practical result of invariance of the maximum likelihood estimator with respect to the choice of equation eliminated from a singular demand system. An empirical application is provided, using the BEKK specifiÂ…cation to model the conditional covariance matrix of the errors of the basic translog demand system. |
| Date: | 2014–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:clg:wpaper:2014-74&r=dcm |
| By: | Mitsukuni Nishida (Johns Hopkins Carey Business School); Nathan Yang (Yale School of Management) |
| Abstract: | We study firm performance dynamics in retail growth using a dynamic model of expansion that allow these dynamics to operate through an unobserved serially correlated process. The model is estimated with data on convenience-store chain diffusion across Japanese prefectures from 1982 to 2012, whereby an actual merger between two chains takes place in 2001. Given the presence of serial correlation and selection biases in observed revenue, we combine particle filtering methods for dynamic games with control functions in revenue regressions. The estimated structural model provides us insights about how performance dynamics evolve before and after the merger. In particular, we demonstrate that the performance dynamics for the merged entity do not improve following the merger. |
| Keywords: | Dynamic discrete choice; Firm size spillovers; Industry dynamics; Learning-by-doing; Market Concentration; Merger analysis; Particle filter; Revenue regression; Serial correlation |
| JEL: | L10 L25 L81 G34 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1408&r=dcm |
| By: | Andrew Clausen (The University of Edinburgh); Carlo Strub (University of St. Gallen) |
| Abstract: | We present an envelope theorem for establishing first-order conditions in decision problems involving continuous and discrete choices. Our theorem accommodates general dynamic programming problems, even with unbounded marginal utilities. And, unlike classical envelope theorems that focus only on differentiating value functions, we accommodate other endogenous functions such as default probabilities and interest rates. Our main technical ingredient is how we establish the differentiability of a function at a point: we sandwich the function between two differentiable functions from above and below. Our theory is widely applicable. In unsecured credit models, neither interest rates nor continuation values are globally differentiable. Nevertheless, we establish an Euler equation involving marginal prices and values. In adjustment cost models, we show that first-order conditions apply universally, even if optimal policies are not (S,s). Finally, we incorporate indivisible choices into a classic dynamic insurance analysis. |
| Keywords: | First-order conditions, discrete choice, unsecured credit, adjustment costs, informal insurance arrangements. |
| Date: | 2014–09–22 |
| URL: | http://d.repec.org/n?u=RePEc:edn:esedps:248&r=dcm |
| By: | Dong He (Hong Kong Monetary Authority and Hong Kong Institute for Monetary Research); Xiangrong Yu (Hong Kong Institute for Monetary Research) |
| Abstract: | The dominance of the US dollar in foreign exchange (FX) markets appears to reflect very strong network effects in the use of international currencies. What we observe today is the result of a slow-moving process that has witnessed a switch from the dominance of the pound sterling to the US dollar, perhaps during the interwar period in the early part of the 20th century. This paper presents a discrete choice model of FX trading that explicitly allows for this type of critical transitions in order to understand the dynamics of currency turnover in FX markets. We estimate the model using the Bank for International Settlements' data from triennial surveys of FX markets and also examine the factors that could potentially shift the dynamic path and lead to an earlier critical transition. We then discuss the implications for the renminbi, a budding international currency. If the renminbi were to become a dominant international currency, it would require China to attain a much higher level of financial development and openness. It is important to note that our model does not address the possibility of a gradual weakening of the network effects in FX markets due to, for example, the advancement of trading technologies, which would allow the co-existence of a few equally dominant major currencies. |
| Keywords: | Foreign Exchange, International Currency, Network Effects, Financial Development, Renminbi, Critical Transition |
| JEL: | F31 F33 G12 O53 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:242014&r=dcm |
| By: | Sarah Brown (Department of Economics, University of Sheffield); Daniel Gray (Department of Economics, University of Sheffield) |
| Abstract: | This paper explores the importance of the household's financial position for an individual's level of well-being. Initially, the empirical analysis, based on a large nationally representative panel survey, aims to ascertain the impact of the household's monetary financial position on overall life satisfaction and financial well-being, with the latter being measured by financial satisfaction and subjective prosperity. Taking into account monetary factors in addition to income, the results indicate that the household's level of net wealth, assets and debt are important determinants of overall life satisfaction and financial well-being. The paper also explores whether the financial situation of households in a comparison group influences an individual's overall life satisfaction and financial well-being. The results suggest that the financial position of households in the comparison group is an important determinant of an individual's level of overall life satisfaction and financial well-being, with information effects generally dominating comparison effects. In addition, the effects of the comparison group are asymmetric depending on whether a household's financial position is above or below the average of the reference group and vary over the life-cycle. |
| Keywords: | financial satisfaction; fixed effects ordered logit; household finances; overall life satisfaction; subjective prosperity |
| JEL: | D14 I31 J28 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:shf:wpaper:2014015&r=dcm |