IDEAS home Printed from https://ideas.repec.org/p/cnc/wpaper/08-2009.html
   My bibliography  Save this paper

Functional Forms in Discrete/Continuous Choice Models with General Corner Solution

Author

Listed:
  • Felipe Vásquez

    (Departamento de Economía, Universidad de Concepción.)

  • Michael Hanemann

    (Department of Agricultural and Resource Economics,University of California, Berkeley)

Abstract

In this paper we present a new utility model that serves as the basis for modeling discrete/continuous consumer choices with a general corner solution.The new model involves a more flexible representation of preferences than what has been used in the previous literature and, unlike most of this literature, it is not additively separable. This functional form can handle richer substitution patterns such as complementarity as well as substitution among goods. We focus in part on the Quadratic Box-Cox utility function and examine its properties from both theoretical and empirical perspectives. We identify the significance of the various parameters of the utility function, and demonstrate an estimation strategy that can be applied to demand systems involving both a small and large number of commodities.

Suggested Citation

  • Felipe Vásquez & Michael Hanemann, 2009. "Functional Forms in Discrete/Continuous Choice Models with General Corner Solution," Working Papers 08-2009, Departamento de Economía, Universidad de Concepción.
    • Handle: RePEc:cnc:wpaper:08-2009
    as

    Download full text from publisher

    File URL: http://educacion.facea.udec.cl/economia/?q=node/160
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Daniel J. Phaneuf & Catherine L. Kling & Joseph A. Herriges, 2000. "Estimation and Welfare Calculations in a Generalized Corner Solution Model with an Application to Recreation Demand," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 83-92, February.
    2. Hanemann, W Michael, 1984. "Discrete-Continuous Models of Consumer Demand," Econometrica, Econometric Society, vol. 52(3), pages 541-561, May.
    3. Joseph A. Herriges & Catherine L. Kling & Daniel J. Phaneuf, 1999. "Corner Solution Models of Recreation Demand: A Comparison of Competing Frameworks," Chapters, in: Joseph A. Herriges & Catherine L. Kling (ed.), Valuing Recreation and the Environment, chapter 6, pages 163-198, Edward Elgar Publishing.
    4. Wales, T. J. & Woodland, A. D., 1983. "Estimation of consumer demand systems with binding non-negativity constraints," Journal of Econometrics, Elsevier, vol. 21(3), pages 263-285, April.
    5. Parsons, George R. & Jakus, Paul M. & Tomasi, Ted, 1999. "A Comparison of Welfare Estimates from Four Models for Linking Seasonal Recreational Trips to Multinomial Logit Models of Site Choice," Journal of Environmental Economics and Management, Elsevier, vol. 38(2), pages 143-157, September.
    6. von Haefen R.H. & Phaneuf D.J. & Parsons G.R., 2004. "Estimation and Welfare Analysis With Large Demand Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 22, pages 194-205, April.
    7. von Haefen, Roger H., 2007. "Empirical strategies for incorporating weak complementarity into consumer demand models," Journal of Environmental Economics and Management, Elsevier, vol. 54(1), pages 15-31, July.
    8. Lee, Lung-Fei & Pitt, Mark M, 1986. "Microeconometric Demand Systems with Binding Nonnegativity Constraints: The Dual Approach," Econometrica, Econometric Society, vol. 54(5), pages 1237-1242, September.
    9. Joseph A. Herriges & Catherine L. Kling (ed.), 1999. "Valuing Recreation and the Environment," Books, Edward Elgar Publishing, number 1315.
    10. Hausman, Jerry A. & Leonard, Gregory K. & McFadden, Daniel, 1995. "A utility-consistent, combined discrete choice and count data model Assessing recreational use losses due to natural resource damage," Journal of Public Economics, Elsevier, vol. 56(1), pages 1-30, January.
    11. Chiang, Jeongwen & Lee, Lung-Fei, 1992. "Discrete/continuous models of consumer demand with binding nonnegativity constraints," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 79-93.
    12. Parsons George R. & Kealy Mary Jo, 1995. "A Demand Theory for Number of Trips in a Random Utility Model of Recreation," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 357-367, November.
    13. Igal Hendel, 1999. "Estimating Multiple-Discrete Choice Models: An Application to Computerization Returns," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(2), pages 423-446.
    14. Kenneth E. Train, 1998. "Recreation Demand Models with Taste Differences over People," Land Economics, University of Wisconsin Press, vol. 74(2), pages 230-239.
    15. Phaneuf, Daniel J. & Smith, V. Kerry, 2006. "Recreation Demand Models," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 15, pages 671-761, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lloyd-Smith, Patrick, 2018. "A new approach to calculating welfare measures in Kuhn-Tucker demand models," Journal of choice modelling, Elsevier, vol. 26(C), pages 19-27.
    2. Chandra Bhat & Abdul Pinjari, 2014. "Multiple discrete-continuous choice models: a reflective analysis and a prospective view," Chapters, in: Stephane Hess & Andrew Daly (ed.), Handbook of Choice Modelling, chapter 19, pages 427-454, Edward Elgar Publishing.
    3. Sikder, Sujan & Pinjari, Abdul Rawoof, 2013. "The benefits of allowing heteroscedastic stochastic distributions in multiple discrete-continuous choice models," Journal of choice modelling, Elsevier, vol. 9(C), pages 39-56.
    4. Neill, Clinton L. & Lahne, Jacob, 2022. "Matching reality: A basket and expenditure based choice experiment with sensory preferences," Journal of choice modelling, Elsevier, vol. 44(C).
    5. Palma, David & Hess, Stephane, 2022. "Extending the Multiple Discrete Continuous (MDC) modelling framework to consider complementarity, substitution, and an unobserved budget," Transportation Research Part B: Methodological, Elsevier, vol. 161(C), pages 13-35.
    6. Abdul Pinjari & Chandra Bhat & David S. Bunch, 2013. "Workshop report: recent advances on modeling multiple discrete-continuous choices," Chapters, in: Stephane Hess & Andrew Daly (ed.), Choice Modelling, chapter 3, pages 73-90, Edward Elgar Publishing.
    7. Castro, Marisol & Bhat, Chandra R. & Pendyala, Ram M. & Jara-Díaz, Sergio R., 2012. "Accommodating multiple constraints in the multiple discrete–continuous extreme value (MDCEV) choice model," Transportation Research Part B: Methodological, Elsevier, vol. 46(6), pages 729-743.
    8. Saxena, Shobhit & Pinjari, Abdul Rawoof & Paleti, Rajesh, 2022. "A multiple discrete-continuous extreme value model with ordered preferences (MDCEV-OP): Modelling framework for episode-level activity participation and time-use analysis," Transportation Research Part B: Methodological, Elsevier, vol. 166(C), pages 259-283.
    9. Bhat, Chandra R., 2022. "A new closed-form two-stage budgeting-based multiple discrete-continuous model," Transportation Research Part B: Methodological, Elsevier, vol. 164(C), pages 162-192.
    10. Bonnet, Céline & Richards, Timothy J., 2016. "Models of Consumer Demand for Differentiated Products," TSE Working Papers 16-741, Toulouse School of Economics (TSE).
    11. Kidokoro, Yukihiro, 2016. "A micro foundation for discrete choice models with multiple categories of goods," Journal of choice modelling, Elsevier, vol. 19(C), pages 54-72.
    12. Daniel K. Lew & Douglas M. Larson, 2011. "A Repeated Mixed Logit Approach to Valuing a Local Sport Fishery: The Case of Southeast Alaska Salmon," Land Economics, University of Wisconsin Press, vol. 87(4), pages 712-729.
    13. Steve Berry & Ahmed Khwaja & Vineet Kumar & Andres Musalem & Kenneth Wilbur & Greg Allenby & Bharat Anand & Pradeep Chintagunta & W. Hanemann & Przemek Jeziorski & Angelo Mele, 2014. "Structural models of complementary choices," Marketing Letters, Springer, vol. 25(3), pages 245-256, September.
    14. Pinjari, Abdul Rawoof & Bhat, Chandra, 2021. "Computationally efficient forecasting procedures for Kuhn-Tucker consumer demand model systems: Application to residential energy consumption analysis," Journal of choice modelling, Elsevier, vol. 39(C).
    15. Xie, Lusi & Adamowicz, Wiktor & Lloyd-Smith, Patrick, 2023. "Spatial and temporal responses to incentives: An application to wildlife disease management," Journal of Environmental Economics and Management, Elsevier, vol. 117(C).
    16. Bhat, Chandra R. & Castro, Marisol & Pinjari, Abdul Rawoof, 2015. "Allowing for complementarity and rich substitution patterns in multiple discrete–continuous models," Transportation Research Part B: Methodological, Elsevier, vol. 81(P1), pages 59-77.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Phaneuf, Daniel J. & Smith, V. Kerry, 2006. "Recreation Demand Models," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 15, pages 671-761, Elsevier.
    2. Kuriyama, Koichi & Michael Hanemann, W. & Hilger, James R., 2010. "A latent segmentation approach to a Kuhn-Tucker model: An application to recreation demand," Journal of Environmental Economics and Management, Elsevier, vol. 60(3), pages 209-220, November.
    3. Sánchez, José J. & Baerenklau, Ken & González-Cabán, Armando, 2016. "Valuing hypothetical wildfire impacts with a Kuhn–Tucker model of recreation demand," Forest Policy and Economics, Elsevier, vol. 71(C), pages 63-70.
    4. Bhat, Chandra R., 2008. "The multiple discrete-continuous extreme value (MDCEV) model: Role of utility function parameters, identification considerations, and model extensions," Transportation Research Part B: Methodological, Elsevier, vol. 42(3), pages 274-303, March.
    5. Tatsuo Suwa, 2008. "Estimation of the spatial substitution effect of national park trip demand: an application of the Kuhn-Tucker model," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 9(4), pages 239-257, December.
    6. von Haefen, Roger H. & Phaneuf, Daniel J., 2003. "Estimating preferences for outdoor recreation:: a comparison of continuous and count data demand system frameworks," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 612-630, May.
    7. von Haefen, Roger H., 2010. "Incomplete Demand Systems, Corner Solutions, and Welfare Measurement," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 39(1), pages 1-15, February.
    8. Tatsuo Suwa, 2008. "Estimation of the spatial substitution effect of national park trip demand: an application of the Kuhn-Tucker model," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 9(4), pages 239-257, December.
    9. Agimass, Fitalew & Lundhede, Thomas & Panduro, Toke Emil & Jacobsen, Jette Bredahl, 2018. "The choice of forest site for recreation: A revealed preference analysis using spatial data," Ecosystem Services, Elsevier, vol. 31(PC), pages 445-454.
    10. Daniel J. Phaneuf & Catherine L. Kling & Joseph A. Herriges, 2000. "Estimation and Welfare Calculations in a Generalized Corner Solution Model with an Application to Recreation Demand," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 83-92, February.
    11. Jean-Pierre H. Dubé, 2018. "Microeconometric Models of Consumer Demand," NBER Working Papers 25215, National Bureau of Economic Research, Inc.
    12. Pradeep K. Chintagunta & Harikesh S. Nair, 2011. "Structural Workshop Paper --Discrete-Choice Models of Consumer Demand in Marketing," Marketing Science, INFORMS, vol. 30(6), pages 977-996, November.
    13. Bujosa Bestard, Angel & Riera Font, Antoni, 2010. "Estimating the aggregate value of forest recreation in a regional context," Journal of Forest Economics, Elsevier, vol. 16(3), pages 205-216, August.
    14. Parsons, George R. & Jakus, Paul M. & Tomasi, Ted, 1999. "A Comparison of Welfare Estimates from Four Models for Linking Seasonal Recreational Trips to Multinomial Logit Models of Site Choice," Journal of Environmental Economics and Management, Elsevier, vol. 38(2), pages 143-157, September.
    15. Herriges, Joseph A. & Phaneuf, Daniel J., 1999. "Controlling for Correlation Across Choice Occasions and Sites in a Repeated Mixed Logit Model of Recreation Demand," Western Region Archives 321717, Western Region - Western Extension Directors Association (WEDA).
    16. Kuriyama, Koichi & Shoji, Yasushi & Tsuge, Takahiro, 2020. "The value of leisure time of weekends and long holidays: The multiple discrete–continuous extreme value (MDCEV) choice model with triple constraints," Journal of choice modelling, Elsevier, vol. 37(C).
    17. Gould, Brian W. & Lee, Yoonjung & Dong, Diansheng & Villarreal, Hector J., 2002. "Household Size And Composition Impacts On Meat Demand In Mexico: A Censored Demand System Approach," 2002 Annual meeting, July 28-31, Long Beach, CA 19722, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    18. Pinjari, Abdul Rawoof & Bhat, Chandra, 2021. "Computationally efficient forecasting procedures for Kuhn-Tucker consumer demand model systems: Application to residential energy consumption analysis," Journal of choice modelling, Elsevier, vol. 39(C).
    19. Smith, V. Kerry, 2000. "JEEM and Non-market Valuation: 1974-1998," Journal of Environmental Economics and Management, Elsevier, vol. 39(3), pages 351-374, May.
    20. Thijs Dekker & Paul (P.R.) Koster & Niek Mouter, 2019. "The economics of participatory value evaluation," Tinbergen Institute Discussion Papers 19-008/VIII, Tinbergen Institute.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cnc:wpaper:08-2009. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ronald Sepulveda (email available below). General contact details of provider: https://edirc.repec.org/data/deudecl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.