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Nonparametric vs parametric binary choice models: An empirical investigation

  • Bontemps, Christophe
  • Racine, Jeffrey S.
  • Simioni, Michel

The estimation of conditional probability distribution functions (PDFs) in a kernel nonparametric framework has recently received attention. As emphasized by Hall, Racine and Li (2004), these conditional PDFs are extremely useful for a range of tasks including modelling and predicting consumer choice. The aim of this paper is threefold. First, we implement nonparametric kernel estimation of PDF with a binary choice variable and both continuous and discrete explanatory variables. Second, we address the issue of the performances of this nonparametric estimator when compared to a classic on-the-shelf parametric estimator, namely a probit. We propose to evaluate these estimators in terms of their predictive performances, in the line of the recent "revealed performance" test proposed by Racine and Parmeter (2009). Third, we provide a detailed discussion of the results focusing on environmental insights provided by the two estimators, revealing some patterns that can only be detected using the nonparametric estimator.

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File URL: http://purl.umn.edu/116005
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Paper provided by European Association of Agricultural Economists in its series 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland with number 116005.

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Date of creation: 02 Sep 2011
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Handle: RePEc:ags:eaae11:116005
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  1. repec:cup:cbooks:9780521355643 is not listed on IDEAS
  2. Qi Li & Jeffrey Scott Racine, 2006. "Nonparametric Econometrics: Theory and Practice," Economics Books, Princeton University Press, edition 1, volume 1, number 8355, April.
  3. Tristen Hayfield & Jeffrey S. Racine, . "Nonparametric Econometrics: The np Package," Journal of Statistical Software, American Statistical Association, vol. 27(i05).
  4. BONTEMPS Christophe & NAUGES Céline, 2006. "Carafe ou bouteille ? Le rôle de la qualité de l'environnement dans la décision du consommateur," LERNA Working Papers 06.07.200, LERNA, University of Toulouse.
  5. Peter Hall & Jeff Racine & Qi Li, 2004. "Cross-Validation and the Estimation of Conditional Probability Densities," Journal of the American Statistical Association, American Statistical Association, vol. 99, pages 1015-1026, December.
  6. Li, Qi & Racine, Jeff, 2003. "Nonparametric estimation of distributions with categorical and continuous data," Journal of Multivariate Analysis, Elsevier, vol. 86(2), pages 266-292, August.
  7. repec:cup:cbooks:9780521586115 is not listed on IDEAS
  8. Jeffrey S. Racine & Christopher F. Parmeter, 2012. "Data-Driven Model Evaluation: A Test for Revealed Performance," Department of Economics Working Papers 2012-13, McMaster University.
  9. Briesch R.A. & Chintagunta P.K. & Matzkin R.L., 2002. "Semiparametric Estimation of Brand Choice Behavior," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 973-982, December.
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