DISCRETE CHOICE MODELS WITH MULTIPLE UNOBSERVED CHOICE CHARACTERISTICS*

Since the pioneering work by Daniel McFadden, utility‐maximization‐based multinomial response models have become important tools of empirical researchers. Various generalizations of these models have been developed to allow for unobserved heterogeneity in taste parameters and choice characteristics. Here we investigate how rich a specification of the unobserved components is needed to rationalize arbitrary choice patterns in settings with many individual decision makers, multiple markets, and large choice sets. We find that if one restricts the utility function to be monotone in the unobserved choice characteristics, then up to two unobserved choice characteristics may be needed to rationalize the choices.     

Determinants of the Willingness of Belgian Farmers to Participate in Agri‐environmental Measures

This paper explores the willingness of Belgian farmers to participate in two voluntary agri‐environmental policies. Farmers' contingent behaviour is analysed on the basis of survey data. Derivations based on a conceptual micro‐economic model indicate that decision subject and decision maker characteristics are important for farmers' participation. The model is empirically tested through the specification and estimation of a probit model. Consistency is found between the theoretical framework and the empirical results indicating that both the expected effect on farm production and the farmers' environmental attitude, which is more positive among younger and better educated farmers, are significant determinants of the acceptance rate of agri‐environmental policies. Other variables which influence participation decisions are farm size and previous experience of farmers themselves or of neighbouring farmers with agri‐environmental measures.     

Taxing a monopolist

We consider a simple, self-financing and informationally undemanding scheme to reduce the deadweight loss due to a monopolist's market power. Essentially, we propose taxing the monopolist and applying the tax revenue to generate a public demand for his output. It turns out that a favorable scenario for such a reform to generate an ‘efficiency increase’ (i.e. to increase total output) is an elasticity of market demand with an absolute value of less than 3 (a seemingly ‘realistic’ condition). We also consider the case for the implementation of the first best, and compare specific and ad-valorem taxes as a way to finance the public demand.     

Can sustainable consumption be learned? A model of cultural evolution

This paper shows how sustainable consumption patterns can spread within a population via processes of social learning even though a strong individual learning bias may favor environmentally harmful products. We present a model depicting how the biased transmission of different behaviors via individual and social learning influences agents' consumption behavior. The underlying learning biases can be traced back to evolved cognitive dispositions. Challenging the vision of a permanent transition toward sustainability, we argue that “green” consumption patterns are not self-reinforcing and cannot be “locked in” permanently.