Smooth approximations by continuous choice-functions

We explore the existence of rational-valued approximation processes by continuous functions of two variables, such that the output continuously depends of the imposed error-bound. To this sake we prove that the theory of densely ordered sets with generic predicates is ℵ0- categorical. A model of the theory and a particular continuous choice-function are constructed. This function transfers to all other models by the respective isomorphisms. If some common-sense conditions are fulfilled, the processes are computable. As a byproduct, other functions with surprising properties can be constructed.

What Do Consumers Consider Before They Choose? Identification from Asymmetric Demand Responses

Consideration set models generalize discrete-choice models by relaxing the assumption that consumers consider all available options. Determining which options were considered has previously required either survey data or restrictions on how attributes impact consideration or utility. We provide an alternative route. In full-consideration models, choice probabilities satisfy a symmetry property analogous to Slutsky symmetry in continuous-choice models. This symmetry breaks down in consideration set models when changes in characteristics perturb consideration. We show that consideration probabilities are constructively identified from the resulting asymmetries. We validate our approach in a lab experiment where consideration sets are known and then apply our framework to study a “smart default” policy in Medicare Part D, wherein consumers are automatically reassigned to lower-cost prescription drug plans with the option of opting out. Full-consideration models imply such a policy will be ineffective because consumers will opt out to avoid switching costs. Allowing for inattention, we find that defaulting all consumers to lower-cost options produces negligible welfare benefits on average, but defaulting only consumers who would save at least $300 produces large benefits.

The relationship between length of stay and land transportation mode in the tourism sector: A discrete–continuous framework applied to Swiss data

This study aims to investigate the relationship between travel mode and length of stay decisions in the context of domestic trips in Switzerland, formulating a discrete–continuous choice model. The adoption of this method allows us to explicitly recognize the interrelated nature of such decisions while testing and measuring the underlying correlation effects. The data source employed for the empirical analysis refers to the Household Budget Survey, which gathers information with regard to the 642 trips undertaken by Swiss resided tourists in 2010 and in particular to the most recent nonbusiness sojourn in this regard. The estimated correlation parameters reveal that tourists are likely to stay longer at the destination when travelling by train and appear to be less inclined to spend more extended sojourns when heading to the destination by car.

Can Allocation-Based Water Rates Promote Conservation and Increase Welfare? A California Case Study

An allocation-based rate (ABR) is a special type of increasing block rate (IBR) price structure that is receiving increased attention from urban water suppliers in places like California where population growth and climate change continue to increase water scarcity. Previous work by Baerenklau et al. [Baerenklau, KA, KA Schwabe and A Dinar (2014a). Allocation-based water pricing promotes conservation while keeping user costs low. Agricultural and Resource Economics Update, 17(6), 1–14; Baerenklau, KA, KA Schwabe and A Dinar (2014b). The residential water demand effect of increasing block rate water budgets. Land Economics, 90(4), 683–699.] investigates the conservation potential of ABR and finds that consumption under ABR was 10–15% below that of a comparable uniform rate structure for a southern California case study. This paper extends that work by using the discrete–continuous choice framework to estimate household-level welfare effects of ABR for the same dataset. We find that despite the observed decrease in consumption, average household welfare actually increased under ABR due to its non-linear structure. We also find that similar results would have been achievable with a simpler standard IBR structure. While either of these block rate structures is welfare-preferred to uniform price and quantity instruments, neither clearly dominates the other.