nep-dcm 2020-08-10 papers

on Discrete Choice Models

Issue of 2020‒08‒10
two papers chosen by
Edoardo Marcucci
Università degli studi Roma Tre

Decoupling the CES distribution circle with quality and beyond: equilibrium distributions and the CES-Logit nexus By Anderson, Simon P; De palma, Andre
Revealed Deliberate Preference Changes By Boissonnet, Niels; Ghersengorin, Alexis; Gleyze, Simon

Decoupling the CES distribution circle with quality and beyond: equilibrium distributions and the CES-Logit nexus

By:	Anderson, Simon P; De palma, Andre
Abstract:	We show for CES demands with heterogeneous productivities that profit, revenue, and output distributions lie in the same closed power-family as the productivity distribution (e.g., the "Pareto circle"). The price distribution lies in the inverse power-family. Equilibrium distribution shapes are linked by linear relations between their density elasticities. Introducing product quality decouples the CES circle, and reconciles Pareto price and Pareto sales revenue distributions. We use discrete choice underpinnings to find variable mark-ups for a more flexible demand formulation bridging CES to Logit and beyond. For logit demand, exponential (resp. normal) quality-cost distributions generate Pareto (log-normal) economic size distributions.
Keywords:	Box-Cox; CES; closed power-family distributions; generalised (log-)normal; Logit; Mark-ups; monopolistic competition; Pareto; Power; Quality
JEL:	F12 L13
Date:	2019–12
URL:	http://d.repec.org/n?u=RePEc:cpr:ceprdp:14168&r=all

Revealed Deliberate Preference Changes

By:	Boissonnet, Niels; Ghersengorin, Alexis; Gleyze, Simon
Abstract:	We propose a model of chosen preferences together with conditions on choice data that falsify and identify our model. Preferences on alternatives are defined on attributes—e.g. candidates for a job may be experienced or inexperienced. Choice behavior is driven by a subset of attributes. Whenever an attribute becomes salient, the decision maker chooses to make it relevant or irrelevant for her future choices—e.g. employers may deliberately ignore race in the future to prevent discrimination. We identify when this decision is based on the maximization of a meta-preference, implying that preference changes are deliberate. This shows that theories of endogenous preferences, motivated reasoning, evolving attention, changing awareness, etc. can be empirically founded. Moreover, the model can rationalize heterogeneity in choice behavior even under the testable hypothesis that agents' preferences and meta-preferences are identical.
Keywords:	Revealed Preference Theory, Reason-Based Choice, Endogenous Preferences, Awareness, Inattention, Changing Tastes
JEL:	D80
Date:	2020–05–19
URL:	http://d.repec.org/n?u=RePEc:pra:mprapa:101756&r=all

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