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on Discrete Choice Models |
| By: | Mogens Fosgerau; John Rehbeck |
| Abstract: | Nontransitive choices have long been an area of curiosity within economics. However, determining whether nontransitive choices represent an individual's preference is a difficult task since choice data is inherently stochastic. This paper shows that behavior from nontransitive preferences under a monotonicity assumption is equivalent to a transitive stochastic choice model. In particular, nontransitive preferences are regularly interpreted as a strength of preference, so we assume alternatives are chosen proportionally to the nontransitive preference. One implication of this result is that one cannot distinguish ``complementarity in attention" and ``complementarity in demand." |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.14631&r=dcm |
| By: | Paolo Galeazzi; Johannes Marti |
| Abstract: | Following the decision-theoretic approach to game theory, we extend the analysis of Epstein & Wang and of Di Tillio from hierarchies of preference relations to hierarchies of choice functions. We then construct the universal choice structure containing all these choice hierarchies, and show how the universal preference structure of Di Tillio is embedded in it. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.11575&r=dcm |
| By: | Carlo Baldassi; Fabio Maccheroni; Massimo Marinacci; Marco Pirazzini |
| Abstract: | We develop a full-fledged analysis of an algorithmic decision process that, in a multialternative choice problem, produces computable choice probabilities and expected decision times. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.03645&r=dcm |
| By: | Peter Haan; Adrián Santonja; Aleksandar Zaklan |
| Abstract: | We evaluate German purchase subsidies for battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) using data on new vehicle registrations in Germany during 2015-2022. We account for confounding time trends and interacting EU-level CO2 standards using neighboring countries as a control group. The program was cost-ineffective, as only 40% of BEV and 25% of PHEV registrations were subsidy-induced, and had strong distributional effects, with greater uptake in wealthier and greener counties. The implied abatement cost of 870 euro per ton of CO2 for BEVs and 2, 470 euro for PHEVs suggests that subsidies to PHEVs were especially cost-ineffective. |
| Keywords: | Decarbonizing road transport, electric mobility, purchase subsidies, policy effectiveness, distributional effects of climate policy |
| JEL: | Q54 Q58 H23 R48 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp2032&r=dcm |
| By: | Liang Chen; Minyuan Zhang |
| Abstract: | This paper focuses on estimating the coefficients and average partial effects of observed regressors in nonlinear panel data models with interactive fixed effects, using the common correlated effects (CCE) framework. The proposed two-step estimation method involves applying principal component analysis to estimate latent factors based on cross-sectional averages of the regressors in the first step, and jointly estimating the coefficients of the regressors and factor loadings in the second step. The asymptotic distributions of the proposed estimators are derived under general conditions, assuming that the number of time-series observations is comparable to the number of cross-sectional observations. To correct for asymptotic biases of the estimators, we introduce both analytical and split-panel jackknife methods, and confirm their good performance in finite samples using Monte Carlo simulations. An empirical application utilizes the proposed method to study the arbitrage behaviour of nonfinancial firms across different security markets. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.13199&r=dcm |
| By: | Andersson, Henrik; Ouvrard, Benjamin |
| Abstract: | Using a discrete choice experiment this study examines whether different types of priming may influence the respondents’ answers when choosing between different policies aimed at reducing the mortality risk due to ambient air pollution. We focus on two types of priming: (i) two versions of an oath where respondents commit to answer truthfully during the survey, and (ii) a priming scenario that combines information about the social cost of ambient air pollution and questions on the respondents’ experiences related to the topic. To test the robustness of the findings the same survey is implemented in two different countries, the United States (US) and the United Kingdom (UK). Results show that respondents behave as expected in the choice situations and the two estimates of the value of statistical life (VSL) obtained are in line with values recommended for policy purposes in both countries. Regarding the priming treatments, we find that the oath treatments have different effects in the US and in the UK, and that the priming scenario has an effect on those who have already been suffering from air pollution (US), or on those who are willing to change and undertake actions to protect the environment (UK). |
| Date: | 2023–05–12 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:128095&r=dcm |
| By: | Volker Nocke; Patrick Rey |
| Abstract: | We develop a model of within-firm sequential, directed search and study a firm’s ability and incentive to steer consumers. We find that the firm often benefits from adopting a noisy positioning strategy, which limits the information available to consumers. This induces consumers to keep searching but discourages some of them from visiting the firm. This occurs even though the firm and the consumers have in common the interest of maximizing the probability of trade. Because of such noisy positioning, an increase in the size of the product line further discourages consumers from visiting the firm—consistent with choice overload. |
| Keywords: | consumer search, sequintal search, directed search, product variety, choice overload, multiproduct firm, platform, steering |
| JEL: | L12 L15 D42 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_421&r=dcm |
| By: | Jean-Jacques Forneron; Liang Zhong |
| Abstract: | Generalized and Simulated Method of Moments are often used to estimate structural Economic models. Yet, it is commonly reported that optimization is challenging because the corresponding objective function is non-convex. For smooth problems, this paper shows that convexity is not required: under a global rank condition involving the Jacobian of the sample moments, certain algorithms are globally convergent. These include a gradient-descent and a Gauss-Newton algorithm with appropriate choice of tuning parameters. The results are robust to 1) non-convexity, 2) one-to-one non-linear reparameterizations, and 3) moderate misspecification. In contrast, Newton-Raphson and quasi-Newton methods can fail to converge for the same estimation because of non-convexity. A simple example illustrates a non-convex GMM estimation problem that satisfies the aforementioned rank condition. Empirical applications to random coefficient demand estimation and impulse response matching further illustrate the results. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.14386&r=dcm |
| By: | Valerie Bostwick; Christopher Severen |
| Abstract: | We provide evidence that graduated driver licensing (GDL) laws, originally intended to improve public safety, impact both high school completion and teen employment. Many teens use automobiles to commute both to school and to employment. Because school and work decisions are interrelated, the effects of automobile-specific mobility restrictions are ex ante ambiguous. Combining variation in the timing of both GDL law adoption and changes in compulsory school laws into a triple-difference research design shows that restricting teen mobility significantly reduces high school dropout rates and teen employment. These findings are consistent with a model in which teens use automobiles to access educational distractions (employment or even risky behaviors). We develop a discrete choice model that reflects reduced access to school, work, and other activities, which reveals that limiting access to work alone cannot explain the reduction in high school dropout rates. |
| Keywords: | Mobility Restrictions; Human Capital; Teen Employment; GDL Laws; Multiple Discreteness |
| JEL: | J24 I20 J22 R48 C35 |
| Date: | 2022–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:94660&r=dcm |
| By: | Gabriela Demarchi (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro - Montpellier SupAgro - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement); Subervie Julie (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro - Montpellier SupAgro - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement); Fernando Palha Leite (CENIBRA - Celulose Nipo-Brasileira SA); Jean-Paul Laclau (UMR Eco&Sols - Ecologie fonctionnelle et biogéochimie des sols et des agro-écosystèmes - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - IRD - Institut de Recherche pour le Développement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro - Montpellier SupAgro - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement) |
| Abstract: | In a climate change context, changing temperature and precipitation patterns are expected to have strong impacts on Brazilian eucalypt plantations. Implementing adaptive water-efficient management practices is thus becoming necessary to maintain high levels of productivity while preserving the water resources. This paper investigates the ability of eucalypt farmers to modify their current silvicultural practices in order to adapt to drought in the near future. We ran a choice experiment in the state of Minas Gerais, among 80 eucalypt tree farmers, who were asked to choose from several management options associated with various financial supports. The results show that adaptation by reducing the length of the eucalypt rotation proves to be by far the preferred option, despite the associated costs. On the contrary, reducing density appears to be the least chosen option by the respondents, which may suggest that they underestimate the benefits of this strategy. We moreover find a clear and relevant segmentation of farmers' choice behavior, the general preference for reducing the length of the eucalypt rotation being driven by the most vulnerable farmers of the sample |
| Keywords: | Choice experiment, Climate change, Drought, Water resources, Adaptation, Eucalypt, Brazil |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03215028&r=dcm |
| By: | Xuan Leng; Yutao Sun |
| Abstract: | Panel data models often use fixed effects to account for unobserved heterogeneities. These fixed effects are typically incidental parameters and their estimators converge slowly relative to the square root of the sample size. In the maximum likelihood context, this induces an asymptotic bias of the likelihood function. Test statistics derived from the asymptotically biased likelihood, therefore, no longer follow their standard limiting distributions. This causes severe distortions in test sizes. We consider a generic class of dynamic nonlinear models with two-way fixed effects and propose an analytical bias correction method for the likelihood function. We formally show that the likelihood ratio, the Lagrange-multiplier, and the Wald test statistics derived from the corrected likelihood follow their standard asymptotic distributions. As a by-product, a bias-corrected estimator of the structural parameter can also be derived from the corrected likelihood function. We evaluate the performance of our bias correction procedure through simulations. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.03134&r=dcm |
| By: | Liang Chen; Juan Jose Dolado; Jesus Gonzalo; Haozi Pan |
| Abstract: | This paper studies the estimation of characteristic-based quantile factor models where the factor loadings are unknown functions of observed individual characteristics while the idiosyncratic error terms are subject to conditional quantile restrictions. We propose a three-stage estimation procedure that is easily implementable in practice and has nice properties. The convergence rates, the limiting distributions of the estimated factors and loading functions, and a consistent selection criterion for the number of factors at each quantile are derived under general conditions. The proposed estimation methodology is shown to work satisfactorily when: (i) the idiosyncratic errors have heavy tails, (ii) the time dimension of the panel dataset is not large, and (iii) the number of factors exceeds the number of characteristics. Finite sample simulations and an empirical application aimed at estimating the loading functions of the daily returns of a large panel of S\&P500 index securities help illustrate these properties. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.13206&r=dcm |
| By: | Yichuan Lou |
| Abstract: | A sender seeks to persuade a receiver by presenting evidence obtained through a sequence of private experiments. The sender has complete flexibility in his choice of experiments, contingent on the private experimentation history. The sender can disclose each experiment outcome credibly, but cannot prove whether he has disclosed everything. By requiring `continuous disclosure', I first show that the private sequential experimentation problem can be reformulated into a static one, in which the sender chooses a single signal to learn about the state. Using this observation, I derive necessary conditions for a signal to be chosen in equilibrium, and then identify the set of beliefs induced by such signals. Finally, I characterize sender-optimal signals from the concavification of his value function constrained to this set. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.04231&r=dcm |
| By: | Salvatore Certo; Anh Pham; Nicolas Robles; Andrew Vlasic |
| Abstract: | A framework to learn a multi-modal distribution is proposed, denoted as the Conditional Quantum Generative Adversarial Network (C-qGAN). The neural network structure is strictly within a quantum circuit and, as a consequence, is shown to represents a more efficient state preparation procedure than current methods. This methodology has the potential to speed-up algorithms, such as Monte Carlo analysis. In particular, after demonstrating the effectiveness of the network in the learning task, the technique is applied to price Asian option derivatives, providing the foundation for further research on other path-dependent options. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.10382&r=dcm |
| By: | Tobi Kossigan (Faculty of Economics, University of Lomé); Edgeweblime Kcodgoh |
| Abstract: | The main objective of this paper is to analyze the effect of land security on the adaptation strategies of agricultural households to climate change in Togo. By applying the multinomial logit model to data from the Harmonized Household Living Conditions Survey conducted by the National Institute of Statistics and Economic and Demographic Studies (INSEED) in 2018- 2019 in Togo, the results show that land tenure security positively and significantly affects the adaptation strategies of agricultural households in Togo. This result remains valid even if we apply ordinary least squares to the coping strategy index constructed from the principal component analysis. The study suggests policies to formally secure agricultural plots in Togo. |
| Abstract: | L'objectif principal de ce papier est d'analyser l'effet de la sécurité foncière sur les stratégies d'adaptation des ménages agricoles au changement climatique au Togo. En appliquant le modèle de logit multinomial aux données de l'enquête Harmonisée sur les Conditions de Vies des ménages réalisée par l'Institut National de la Statistique et des Études Économiques et Démographiques (INSEED) en 2018-2019 au Togo, les résultats montrent que la sécurité foncière affecte positivement et significativement les stratégies d'adaptation des ménages agricoles au Togo. Ce résultat reste valable même si nous appliquons les moindres carrés ordinaires à l'indice de stratégie d'adaptation construit à partir de l'analyse en composante principale. L'étude suggère des politiques visant la sécurisation formelle des parcelles agricoles au Togo |
| Keywords: | Climate change, land security, adaptation strategies, multinomial logit model, Togo, Changement climatique sécurité foncière stratégies d'adaptation modèle de logit multinomial Togo Climate change land security adaptation strategies multinomial logit model Togo, Changement climatique, sécurité foncière, stratégies d'adaptation, modèle de logit multinomial |
| Date: | 2022–10–27 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04031537&r=dcm |
| By: | Ranoua Bouchouicha; Jilong Wu; Ferdinand M. Vieider (-) |
| Abstract: | The fourfold pattern of risk attitudes has been called ‘the most distinctive implication of prospect theory’. It constitutes the central mechanism by which prospect theory (PT) explains the coexistence of gambling and insurance. Here, we compare risk-taking patterns obtained from certainty equivalents (CEs) to risk-taking patterns observed when presenting all single choices contained in the CE lists one-by-one in a binary choice setup. Choices obtained from CEs indicate a clear fourfold pattern. Binary choices, on the other hand, indicate risk aversion for small probability gains, and risk seeking for small probabilities losses—the opposite of what is predicted by the fourfold pattern. The use of CEs to measure PT parameters is often justified based on the fact that they avoid endogenous reference points, which have been documented by comparing CEs to probability equivalents (PEs). We show that loss aversion in a PT model can actually not account for this discrepancy, since the gap between CEs and PEs requires different loss aversion coefficients for each PE task. Our results thus question the applicability of PT beyond the restrictive realm of CEs, which are arguably a poor proxy for most real-world decisions. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:23/1068&r=dcm |
| By: | Yosuke Hashidate; Keisuke Yoshihara |
| Abstract: | This study proposes a tractable stochastic choice model to identify motivations for prosocial behavior, and to explore alternative motivations of deliberate randomization beyond ex-ante fairness concerns. To represent social preferences, we employ an additively perturbed utility model consisting of the sum of expected utility and a nonlinear cost function, where the utility function is purely selfish while the cost function depends on social preferences. Using the cost function, we study stochastic choice patterns to distinguish between stochastic inequity-averse behavior and stochastic shame-mitigating behavior. Moreover, we discuss how our model can complement recent experimental evidence of ex-post and ex-ante fairness concerns. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.14977&r=dcm |
| By: | Yasunori Okumura |
| Abstract: | We consider linear orders of finite alternatives that are constructed by aggregating the preferences of individuals. We focus on a linear order that is consistent with the collective preference relation, which is constructed by one of the supermajority rules and modified using two procedures if there exist some cycles. One modification procedure uses the transitive closure, and the other uses the Suzumura consistent closure. We derive two sets of linear orders that are consistent with the (modified) collective preference relations formed by any of the supermajority rules. These sets of linear orders are closely related to those obtained through Tideman's ranked pairs method and the Schulze method. Finally, we consider two social choice correspondences whose output is one of the sets introduced above, and show that the correspondences satisfy the four properties: the extended Condorcet principle, the Pareto principle, the independence of clones, and the reversal symmetry. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.09419&r=dcm |
| By: | Volker Nocke; Patrick Rey |
| Abstract: | We develop a model of within-firm sequential, directed search and study a firm’s ability and incentive to steer consumers. We find that the firm often benefits from adopting a noisy positioning strategy, which limits the information available to consumers. This induces consumers to keep searching but discourages some of them from visiting the firm. This occurs even though the firm and the consumers have in common the interest of maximizing the probability of trade. Because of such noisy positioning, an increase in the size of the product line further discourages consumers from visiting the firm—consistent with choice overload. |
| Keywords: | Consumer Search, Sequential Search, Directed Search, Product Variety, Coice Overload, Multiproduct Firm, Platform, Steering |
| JEL: | L12 L15 D42 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_42x&r=dcm |
| By: | Blonz, Joshua; Palmer, Karen (Resources for the Future); Wichman, Casey (Resources for the Future); Wietelman, Derek C. |
| Abstract: | We evaluate an experiment in which randomly encouraged households activate a smart-thermostat feature that automates responsiveness to time-of-use electricity pricing. The thermostat feature reduces electricity use by raising indoor temperatures, thus increasing thermal discomfort in some households during peak periods. Changes in discomfort are small, concentrated among households who spend the most time at home, and do not prompt them to adjust the feature’s intensity or deactivate it. Using energy cost savings and experienced indoor temperatures, we calculate households’ revealed preference trade-off between comfort and cooling expenditure and find that households are willing to trade off small monetary savings for small increases in discomfort. Automation thus provides a low-cost opportunity to make small changes in energy demand at the household level, with potentially large electricity supply-cost reductions at scale. |
| Date: | 2021–07–21 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-21-20&r=dcm |
| By: | Leard, Benjamin (Resources for the Future); Linn, Joshua (Resources for the Future); Springel, Katalin |
| Abstract: | This paper presents welfare and distributional effects of US passenger vehicle fuel economy and greenhouse gas standards between 2012 and 2022. We build an equilibrium model that allows for endogenous markups, market shares, and nonprice attributes. The model includes fixed and variable costs of raising fuel economy, manufacturer substitution between fuel economy and performance, and heterogeneous consumer preferences and manufacturer costs. We estimate all demand and supply parameters from observed consumer and manufacturer choices. We find that the standards have increased social welfare and that consumer undervaluation of fuel cost savings accounts for most of the social benefits. Manufacturers achieve most fuel economy improvements by trading off horsepower rather than adjusting prices or adding fuel-saving technology. Due to this compliance strategy, the standards have been progressive because high-income households value horsepower much more than low-income households do. Consumer undervaluation of fuel cost savings also contributes to progressivity. |
| Date: | 2023–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-23-04&r=dcm |