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A Rank‐Ordered Logit Model With Unobserved Heterogeneity In Ranking Capabilities

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  • Dennis Fok
  • Richard Paap
  • Bram Van Dijk

Abstract

In this paper we consider the situation where one wants to study the preferences of individuals over a discrete choice set through a survey. In the classical setup respondents are asked to select their most preferred option out of a (selected) set of alternatives. It is well known that, in theory, more information can be obtained if respondents are asked to rank the set of alternatives instead. In statistical terms, the preferences can then be estimated more efficiently. However, when individuals are unable to perform (part of) this ranking task, using the complete ranking may lead to a substantial bias in parameter estimates. In practice, one usually opts to only use a part of the reported ranking. In this paper we introduce a latent-class rank-ordered logit model in which we use latent segments to endogenously identify the ranking capabilities of individuals. Each segment corresponds to a different assumption on the ranking capability. Using simulations and an empirical application, we show that using this model for parameter estimation results in a clear efficiency gain over a multinomial logit model in case some individuals are able to rank. At the same time it does not suffer from biases due to ranking inabilities of some of the respondents.
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Suggested Citation

  • Dennis Fok & Richard Paap & Bram Van Dijk, 2012. "A Rank‐Ordered Logit Model With Unobserved Heterogeneity In Ranking Capabilities," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(5), pages 831-846, August.
  • Handle: RePEc:wly:japmet:v:27:y:2012:i:5:p:831-846
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    References listed on IDEAS

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    1. van Ophem, Hans & Stam, Piet & Van Praag, Bernard M S, 1999. "Multichoice Logit: Modeling Incomplete Preference Rankings of Classical Concerts," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 117-128, January.
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    6. Darrell R. Mark & Jayson L. Lusk & M. Scott Daniel, 2004. "Recruiting Agricultural Economics Graduate Students: Student Demand for Program Attributes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 175-184.
    7. Hausman, Jerry A. & Ruud, Paul A., 1987. "Specifying and testing econometric models for rank-ordered data," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 83-104.
    8. Koop, G & Poirier, D J, 1994. "Rank-Ordered Logit Models: An Empirical Analysis of Ontario Voter Preferences," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(4), pages 369-388, Oct.-Dec..
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    Cited by:

    1. Yoo, Hong Il & Doiron, Denise, 2013. "The use of alternative preference elicitation methods in complex discrete choice experiments," Journal of Health Economics, Elsevier, vol. 32(6), pages 1166-1179.
    2. Bauer, Dana & Liu, Pengfei & Swallow, Stephen K. & Johnston, Robert J., 2013. "Do Exurban Communities Want More Development?," Working Papers 25, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    3. repec:kap:enreec:v:68:y:2017:i:4:d:10.1007_s10640-016-0058-7 is not listed on IDEAS
    4. Strazzera, Elisabetta & Statzu, Vania, 2017. "Fostering photovoltaic technologies in Mediterranean cities: Consumers’ demand and social acceptance," Renewable Energy, Elsevier, vol. 102(PB), pages 361-371.
    5. Ghimire, Ramesh & Green, Gary T. & Paudel, Krishna P. & Poudyal, Neelam C. & Cordell, H. Ken, 2017. "Visitors' Preferences for Freshwater Amenity Characteristics: Implications from the U.S. Household Survey," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 42(1), January.
    6. Dumortier, Jerome & Siddiki, Saba & Carley, Sanya & Cisney, Joshua & Krause, Rachel M. & Lane, Bradley W. & Rupp, John A. & Graham, John D., 2015. "Effects of providing total cost of ownership information on consumers’ intent to purchase a hybrid or plug-in electric vehicle," Transportation Research Part A: Policy and Practice, Elsevier, vol. 72(C), pages 71-86.
    7. Wamisho, Kassu & De Laporte, Aaron & Ripplinger, David, 2015. "Biomass Contracts for Ethanol Production: The Role of Farmer’s Risk Preferences," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205703, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    8. Marino, Davide & Mastronardi, Luigi & Franco, Silvio & De Gregorio, Daniela & Cicatiello, Clara & Pancino, Barbara, 2013. "Farmers’ Markets, Producer and Consumer Behaviour: Analysis of Interactions with the Metrics of Sustainability," 2013 International European Forum, February 18-22, 2013, Innsbruck-Igls, Austria 164751, International European Forum on Innovation and System Dynamics in Food Networks.
    9. repec:spr:empeco:v:53:y:2017:i:4:d:10.1007_s00181-016-1169-2 is not listed on IDEAS
    10. Rajesh Paleti & Peter Vovsha & Gaurav Vyas & Rebekah Anderson & Gregory Giaimo, 2017. "Activity sequencing, location, and formation of individual non-mandatory tours: application to the activity-based models for Columbus, Cincinnati, and Cleveland, OH," Transportation, Springer, vol. 44(3), pages 615-640, May.
    11. Touza, Julia & Pérez-Alonso, Alicia & Chas-Amil, María L. & Dehnen-Schmutz, Katharina, 2014. "Explaining the rank order of invasive plants by stakeholder groups," Ecological Economics, Elsevier, vol. 105(C), pages 330-341.
    12. Camilo Andres Garzon & Maria Catalina Rey & Paula Juliana Sarmiento & Juan Camilo Cardenas, 2016. "Fisheries, fish pollution and biodiversity: choice experiments with fishermen, traders and consumers," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(3), pages 333-353, December.
    13. Dumortier, Jerome & Siddiki, Saba & Carley, Sanya & Cisney, Joshua & Krause, Rachel & Lane, Bradley & Rupp, John & Graham, John, 2015. "Effects of Life Cycle Cost Information Disclosure on the Purchase Decision of Hybrid and Plug-In Vehicles," IU SPEA AgEcon Papers 198643, Indiana University, IU School of Public and Environmental Affairs.
    14. Arie Beresteanu, 2016. "Efficeincy Gains in Rank-ordered Multinomial Logit Models," Working Paper 5878, Department of Economics, University of Pittsburgh.

    More about this item

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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