This book describes the new generation of discrete choice methods, focusing on the many advances that are made possible by simulation. Researchers use these statistical methods to examine the choices that consumers, households, firms, and other agents make. Each of the major models is covered: logit, generalized extreme value, or GEV (including nested and cross-nested logits), probit, and mixed logit, plus a variety of specifications that build on these basics. Simulation-assisted estimation procedures are investigated and compared, including maximum simulated likelihood, method of simulated moments, and method of simulated scores. Procedures for drawing from densities are described, including variance reduction techniques such as anithetics and Halton draws. Recent advances in Bayesian procedures are explored, including the use of the Metropolis-Hastings algorithm and its variant Gibbs sampling. No other book incorporates all these fields, which have arisen in the past 20 years. The procedures are applicable in many fields, including energy, transportation, environmental studies, health, labor, and marketing.

/pdf/discrete-choice-methods-with-simulation-l1x4cghjtt.pdf

Discrete Choice Methods with Simulation

We demonstrate that a simple model, constructed on the premise that people are motivated by both their pecuniary payoff and their relative payoff standing, organizes a large and seemingly disparate set of laboratory observations as one consistent pattern The model is incomplete information but nevertheless posed entirely in terms of directly observable variables The model explains observations from games where equity is thought to be a factor, such as ultimatum and dictator, games where reciprocity is thought to play a role, such as the prisoner's dilemma and gift exchange, and games where competitive behavior is observed, such as Bertrand markets (JEL C78, C90, D63, D64, H41)

/pdf/erc-a-theory-of-equity-reciprocity-and-competition-9lhkqwqjzg.pdf

ERC: A Theory of Equity, Reciprocity, and Competition

1. Introduction and Overview. 2. Detecting Influential Observations and Outliers. 3. Detecting and Assessing Collinearity. 4. Applications and Remedies. 5. Research Issues and Directions for Extensions. Bibliography. Author Index. Subject Index.

Regression Diagnostics: Identifying Influential Data and Sources of Collinearity

Statistical Analysis with Missing Data

Since the work of Bishop and Heberlein, a number of contingent valuation experiments have appeared involving discrete responses which are analyzed by logit or similar techniques. This paper addresses the issues of how the logit models should be formulated to be consistent with the hypothesis of utility maximization and how measures of compensating and equivalent surplus should be derived from the fitted models. Two distinct types of welfare measures are introduced and then estimated from Bishop and Heberlein's data.

Welfare Evaluations in Contingent Valuation Experiments with Discrete Responses

The statistical efficiency of conventional dichotomous choice contingent valuation surveys can be improved by asking each respondent a second dichotomous choice question which depends on the response to the first question—if the first response is "yes," the second bid is some amount greater than the first bid; while, if the first response is "no," the second bid is some amount smaller. This "double-bounded" approach is shown to be asymptotically more efficient than the conventional, "singlebounded" approach. Using data from a survey of Californians regarding their willingness to pay for wetlands in the San Joaquin Valley, we show that, in a finite sample, the gain in efficiency can be very substantial.

Statistical Efficiency of Double-Bounded Dichotomous Choice Contingent Valuation

The ability to place a monetary value on the consequences of pollution discharges is a cornerstone of the economic approach to the environment. If this cannot be done, it undercuts the use of economic principles, whether to determine the optimal level of pollution or to implement this via Pigouvian taxes or Coase-style liability rules. Sometimes, the valuation involves a straightforward application of methods for valuing market commodities, as when sparks from a passing train set fire to a wheat field. Often, however, the valuation is more difficult. Outcomes such as reducing the risk of human illness or death, maintaining populations of native fish in an estuary, or protecting visibility at national parks are not themselves goods that are bought and sold in a market. Yet, placing a monetary value on them can be essential for sound policy. The lack of a market to generate prices for such outcomes is no accident. Markets are often missing in such cases because of the nonexcludable or nonrival nature of the damages: for those affected by it, pollution may be a public good (or bad). The public good nature of the damages from pollution has several consequences. It explains, for example, why the damages are sometimes large—only a few people may want to own a sea otter pelt, say, but many may want this animal protected in the wild. It also explains why market prices are inappropriate measures of value. In the presence of externalities , market transactions do not fully capture preferences. Collective choice is the more relevant paradigm. This is precisely what Ciriacy-Wantrup (1947) had in mind when he first proposed the contingent valuation method. Individuals should be interviewed

https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.8.4.19

Valuing the Environment through Contingent Valuation

project that requires structured valuation stages, open to the community dimension. The limits of traditional economic analysis should be exceeded by adopting new generally used: Revealed Preference Techniques and Stated Preference Preferences Techniques: A Manual, Edward Elgar: Cheltenham, UK, 2002. Economic valuation with stated preference techniques: a manual. Choice modelling approaches: a superior alternative for environmental valuation? N Hanley.

/pdf/economic-valuation-with-stated-preference-techniques-a-37oco3kqb6.pdf

Economic Valuation with Stated Preference Techniques: a Manual

I agree with the point made by Edoh Y. Amiran and Daniel A. Hagen (2003) that there can be a substantial, or even infinite, divergence between the WTA and WTP for a public good even where there is a nonzero elasticity of substitution between market goods and the public good, provided that the indifference curves are asymptotically bounded with respect to market goods in the manner they describe. This is an important point. They are also correct to point out that the elasticity of substitution is a local concept, whereas their asymptotic boundedness condition applies also for discrete changes. My 1991 paper used a local analysis because it was following the structure of the analysis in Robert D. Willig (1976) and Alan Randall and John R. Stoll (1980); I wanted to show that, while Randall and Stoll appeared to extend Willig’s local result on WTA versus WTP from price changes to changes in the quantity of a public good, the relevant elasticity was in fact different and involved the substitution elasticity as well as the income elasticity. I view these points by Amiran and Hagen as not two separate results but essentially the same result: their asymptotic boundedness condition generalizes my zero elasticity of substitution condition to discrete changes. The asymptotic boundedness condition can be expressed as follows: assuming a bivariate utility function u( x, q), and given a reference point ( x*, q*) associated with a reference utility level u* u( x*, q*), there exists some q q* such that, for all q q , there exists no x such that u( x , q) u*. In other words, no amount of x can substitute for the reduction in public good from q* to q q . In the case of a zero elasticity of substitution, q q* but, as Amiran and Hagen show in their Theorem 1, this is unnecessarily restrictive when dealing with a discrete reduction in q. Furthermore, their Theorem 2 can be viewed as a special case of their Theorem 1 in which q 0, which makes q an essential commodity. It is well known in consumer theory that the WTA to avoid the loss of an essential market good is infinite; their Theorem 2 extends this result to the case of an essential nonmarket good. But, as their Theorem 1 shows, essentialness is not necessary for an infinite WTA. The boundedness condition is the key, and this implies a fundamental lack of substitutability between money (market goods) and the public good.

W. Michael Hanemann

Papers

Welfare Evaluations in Contingent Valuation Experiments with Discrete Responses

Statistical Efficiency of Double-Bounded Dichotomous Choice Contingent Valuation

Valuing the Environment through Contingent Valuation

Economic Valuation with Stated Preference Techniques: a Manual

Willingness To Pay and Willingness To Accept: How Much Can They Differ? Comment