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on Discrete Choice Models |
| By: | Kettlewell, Nathan (University of Technology, Sydney); Walker, Matthew J. (Newcastle University); Yoo, Hong Il (Loughborough University) |
| Abstract: | Discrete choice experiments (DCEs) often present concise choice scenarios that may appear incomplete to respondents. To allow respondents to express uncertainty arising from this incompleteness, DCEs may ask them to state probabilities with which they expect to make specific choices. The workhorse method for analyzing the elicited probabilities involves semi-parametric estimation of population average preferences. Despite flexible distributional assumptions, this method presents challenges in estimating unobserved preference heterogeneity, a key element in non-market valuation studies. We introduce a fractional response model based on a mixture of beta distributions. The model enables researchers to uncover preference heterogeneity under comparable parametric assumptions as adopted in conventional choice analysis, and can accommodate multiplicative forms of heterogeneity that make the semi-parametric method inconsistent. Using a DCE on alternative fuel vehicles, we illustrate the complementary roles of the parametric and semi-parametric approaches. We also undertake a separate analysis in which respondents are randomized to either a DCE employing a conventional choice elicitation format or a parallel DCE employing the probability elicitation format. |
| Keywords: | discrete choice experiment, probability elicitation, mixed logit, beta regression; willingness to pay |
| JEL: | C35 D12 D84 Q42 R41 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16821&r=dcm |
| By: | John C. Whitehead; Alicia Louis Cornicelli; Lisa Bragg; Rob Southwick |
| Abstract: | We use the contingent valuation method in a survey of Great Lakes anglers to estimate the willingness to pay for a Great Lakes recreational fishing trip. Employing various assumptions and models, we find that the willingness to pay for a trip ranges from $54 to $101 ($2020). We then combine the willingness to pay per trip estimates with an estimate of the number of trips and find that the aggregate economic value of Great Lakes fishing trips in the U.S. is $611 million. We conduct a sensitivity analysis over the estimates of willingness to pay and the number of trips and estimate that the 90% confidence interval around the mean estimate of $632 million is ($182.5, $1, 553) million. Key Words: Economics, Recreational fishing, Willingness to pay |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:apl:wpaper:24-11&r=dcm |
| By: | Miwa Nakai (Faculty of Economics, Fukui Prefectural University, 4-1-1, Matsuoka Kenjojima, Eiheiji-cho, Fukui, 910-1195, Japan); Naonari Yajima (Faculty of Economics, Seijo University, 6-1-20, Seijo, Setagata-ku, Tokyo, 157-0066, Japan); Majah-Leah Ravago (Department of Economics, Ateneo de Manila University, Room 409, Leong Hall, Loyola Heights, Quezon City, Philippines 1108) |
| Abstract: | Energy efficiency of home appliances plays a crucial role in climate mitigation policies, especially considering the increasing energy consumption in developing countries. Particularly in countries with high temperatures such as the Philippines, switching to energy efficient air conditioners (ACs) can make a substantial contribution to both climate mitigation and sustainable development. We conducted a field survey among households with a choice experiment in the Philippines. We investigated the attributes that influence the decision to purchase ACs and to understand the variations in preferences among consumers in the tropics. Utilizing primary data with a broad range of socio-economic characteristics, we find that households have higher willingness-to-pay for energy efficient models. Moreover, in terms of preference variability, certain consumer groups such as AC owners, younger age segments, higher income brackets, and those with higher environmental awareness displayed higher willingness-to-pay. Furthermore, our survey reveals the potential for a significant rebound effect in AC use if households purchase an energy efficient model. Therefore, we emphasise the importance of combining the transition to energy efficient ACs with additional policy measures to reduce wastage and consume energy efficiently across other domains, as a country transitions to more sustainable and cleaner energy. |
| Keywords: | Appliance labelling, Energy-saving behaviour, Choice experiment, Air conditioner, Tropical climate, Philippines |
| JEL: | D12 R11 Q56 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:was:dpaper:2304&r=dcm |
| By: | John C. Whitehead; Alicia Louis Cornicelli; Gregory Howard |
| Abstract: | We use stated preference methods to estimate willingness to pay to avoid reductions in recreational catch in Great Lakes fisheries. We compare willingness to pay estimates where uncertain “in favor” votes are recoded to “against” votes to an attribute non-attendance model that focuses on the policy cost attribute. We find that the two hypothetical bias models yield similar results. We estimate another attribute non-attendance model that also considers the scope of the policy and find that the scope elasticity is significantly underestimated in other models. The willingness to pay in this last model is higher than in the other models. Key Words: Attribute non-attendance, Hypothetical bias, Scope test, Willingess to pay |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:apl:wpaper:24-10&r=dcm |
| By: | Selim Manka\"i (IAE - UCA, UCA); S\'ebastien Marchand (CERDI, UCA); Ngoc Ha Le (UCA) |
| Abstract: | The demand for voluntary insurance against low-probability, high-impact risks is lower than expected. To assess the magnitude of the demand, we conduct a meta-analysis of contingent valuation studies using a dataset of experimentally elicited and survey-based estimates. We find that the average stated willingness to pay (WTP) for insurance is 87% of expected losses. We perform a meta-regression analysis to examine the heterogeneity in aggregate WTP across these studies. The meta-regression reveals that information about loss probability and probability levels positively influence relative willingness to pay, whereas respondents' average income and age have a negative effect. Moreover, we identify cultural sub-factors, such as power distance and uncertainty avoidance, that provided additional explanations for differences in WTP across international samples. Methodological factors related to the sampling and data collection process significantly influence the stated WTP. Our results, robust to model specification and publication bias, are relevant to current debates on stated preferences for low-probability risks management. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.16375&r=dcm |
| By: | Martin Bustos |
| Abstract: | I provide a model of rational inattention with heterogeneity and prove it is observationally equivalent to a state-dependent stochastic choice model subject to attention costs. I demonstrate that additive separability of unobservable heterogeneity, together with an independence assumption, suffice for the empirical model to admit a representative agent. Using conditional probabilities, I show how to identify: how covariates affect the desirability of goods, (a measure of) welfare, factual changes in welfare, and bounds on counterfactual market shares. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.09789&r=dcm |
| By: | B. Douglas Bernheim; Kristy Kim; Dmitry Taubinsky |
| Abstract: | The standard revealed-preference approach to welfare economics encounters fundamental difficulties when the act of choosing directly affects welfare through emotions such as guilt, pride, and anxiety. We address this problem by developing an approach that redefines consumption bundles in terms of the sensations they produce, and measures welfare by blending choice-based methods with self-reported well-being techniques. In applications to classic social preferences paradigms, our approach shows that standard revealed-preference methods, including those that exploit choices over menus, mismeasure welfare because preferences depend on choice sets, while self-reported happiness and satisfaction are not sufficient statistics for welfare. |
| JEL: | D60 D91 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32200&r=dcm |
| By: | Ruixuan Liu; Zhengfei Yu |
| Abstract: | We consider a quasi-Bayesian method that combines a frequentist estimation in the first stage and a Bayesian estimation/inference approach in the second stage. The study is motivated by structural discrete choice models that use the control function methodology to correct for endogeneity bias. In this scenario, the first stage estimates the control function using some frequentist parametric or nonparametric approach. The structural equation in the second stage, associated with certain complicated likelihood functions, can be more conveniently dealt with using a Bayesian approach. This paper studies the asymptotic properties of the quasi-posterior distributions obtained from the second stage. We prove that the corresponding quasi-Bayesian credible set does not have the desired coverage in large samples. Nonetheless, the quasi-Bayesian point estimator remains consistent and is asymptotically equivalent to a frequentist two-stage estimator. We show that one can obtain valid inference by bootstrapping the quasi-posterior that takes into account the first-stage estimation uncertainty. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.17374&r=dcm |
| By: | Krecik, Markus |
| Abstract: | Behavioral economics has so far largely avoided discussing the psychological origins of preferences, as well as their relation to needs. This has not only restricted interdisciplinary exchange, but also significantly limits the predictive capabilities of models. For example, the revealed preference approach can only reliably predict repeating choices, while needing large amounts of observations for calibration. In this paper, I show how unifying preferences with the psychological concept of needs strengthens economic models, by developing a decision-making framework for well-being assessment and choice prediction. To present the direct merit of this approach, I show how this framework yields a systematic approximation scheme, which is able to solve limitations of current approaches by describing new alternatives, non-repeating choices, or otherwise unobservable desires. Meanwhile, the approximation scheme requires less observations on an individual level than current approaches. I achieve this by constructing a hierarchical dependency between human motivations and preferences through the language of needs. I show the basic feasibility of the approximation scheme through simulations on random populations. In practice, the framework is applicable in situations where individuals exert choices only once and measuring preferences is expensive, like evaluating policy proposals or predicting decisions under technological change. |
| Keywords: | Preferences, Basic Needs, Decision-Making, Behavioral Economics, Welfare Economics |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fubsbe:284393&r=dcm |
| By: | Thomas Dohmen; Georgios Gerasimou |
| Abstract: | We study if participants in a choice experiment learn to behave in ways that are closer to the predictions of ordinal and expected utility theory as they make decisions from the same menus repeatedly and without receiving feedback of any kind. We designed and implemented a non-forced-choice lab experiment with money lotteries and five repetitions per menu that aimed to test this hypothesis from many behavioural angles. In our data from 308 subjects in the UK and Germany, significantly more individuals were ordinal- and expected-utility maximizers in their last 15 than in their first 15 identical decision problems. Furthermore, around a quarter and a fifth of all subjects, respectively, decided in those modes throughout the experiment, with nearly half revealing non-trivial indifferences. A considerable overlap was found between those consistently rational individuals and the ones who satisfied core principles of random utility theory. Finally, in addition to finding that choice consistency is positively correlated with cognitive ability, we document that subjects who learned to maximize utility were more cognitively able than those who did not. We discuss potential implications of our analysis. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.16538&r=dcm |
| By: | Bruno F. Oliveira; Alessandro V. M. Oliveira |
| Abstract: | This study aims to discuss the impacts of a low-cost airline on the air transport market and, especially, to present the most recent findings from specialized literature in the field. To this end, various works on this topic, published since 2015, were selected and analyzed. From this analysis, it was possible to categorize the main topics discussed in the papers into five groups: (i) the impacts of a low-cost airline on competing airlines; (ii) impacts on airports; (iii) general impacts on the demand for air transport; (iv) effects on passengers' choice process; and (v) general effects on a geographical region. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.11372&r=dcm |
| By: | Stergios Athanasoglou; Somouaoga Bonkoungou |
| Abstract: | We consider a group of voters that needs to decide between two candidates. We propose a novel family of neutral and strategy-proof rules, which we call sequential unanimity rules. By demonstrating their formal equivalence to the M-winning coalition rules of Moulin (1983), we show that sequential unanimity rules are characterized by neutrality and strategy-proofness. We establish our results by developing algorithms that transform a given M-winning coalition rule into an equivalent sequential unanimity rule and vice versa. The analysis can be extended to accommodate the full preference domain in which voters may be indifferent between candidates. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.13009&r=dcm |
| By: | Chung Yi See; Vasco Rato Santos; Lucas Woodley; Megan Yeo; Daniel Palmer; Shuheng Zhang; Ashley Nunes |
| Abstract: | Although electric vehicles are less polluting than gasoline powered vehicles, adoption is challenged by higher procurement prices. Existing discourse emphasizes EV battery costs as being principally responsible for this price differential and widespread adoption is routinely conditioned upon battery costs declining. We scrutinize such reasoning by sourcing data on EV attributes and market conditions between 2011 and 2023. Our findings are fourfold. First, EV prices are influenced principally by the number of amenities, additional features, and dealer-installed accessories sold as standard on an EV, and to a lesser extent, by EV horsepower. Second, EV range is negatively correlated with EV price implying that range anxiety concerns may be less consequential than existing discourse suggests. Third, battery capacity is positively correlated with EV price, due to more capacity being synonymous with the delivery of more horsepower. Collectively, this suggests that higher procurement prices for EVs reflects consumer preference for vehicles that are feature dense and more powerful. Fourth and finally, accommodating these preferences have produced vehicles with lower fuel economy, a shift that reduces envisioned lifecycle emissions benefits by at least 3.26 percent, subject to the battery pack chemistry leveraged and the carbon intensity of the electrical grid. These findings warrant attention as decarbonization efforts increasingly emphasize electrification as a pathway for complying with domestic and international climate agreements. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2403.00458&r=dcm |
| By: | Johannes Carow (Johannes Gutenberg University Mainz) |
| Abstract: | Since the seminal work from Bertrand & Schoar (2003), the separate estimation of person effects and firm effects remains a widely used method in the analysis of firm-level dependent variables. Recently, this class of models has experienced serious methodological criticism, stating that person effects only reflect spurious variation. Rather than rejecting this estimation technique per se, I recommend a strategy based on simulation analysis to test for the presence of person effects. This strategy takes limitations of a previous test for idiosyncratic person effects into account. Further, I show that the estimation of person effects is subject to attenuation bias and that the size of this bias increases in the number of persons per firm-year. I also demonstrate that the use of Unconditional Quantile Regressions for estimated person effects can produce statistical artefacts at the upper and lower tail of the distribution. Additionally, attenuation bias impairs the analysis of the correlation of person effects pertaining to different dependent variables. |
| Keywords: | Two-way fixed-effects, simulations, managers, spurious variation, attenuation bias |
| JEL: | C15 C18 C21 L25 |
| Date: | 2024–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:jgu:wpaper:2405&r=dcm |