Working Papers

The WNE Working Papers series has been published by the Faculty of Economic Sciences at the University of Warsaw since 2008.

The WNE Working Papers series provides a fast, open channel for disseminating research conducted at the Faculty of Economic Sciences, University of Warsaw. The papers hosted here are working versions (pre-prints) and may evolve as authors refine their analyses, incorporate feedback, or progress through formal peer-review. What you read is the current version released by the authors, timestamped and assigned DOI/ISSN identifiers to ensure precise citation and version tracking. Copyright remains with the authors, who may, at any time, upload a revised file or add a note directing readers to a later, peer-reviewed publication.

The Working Papers series accepts articles by research employees of the Faculty and publications from conferences organised at the Faculty of Economic Sciences at the University of Warsaw. Articles should be original research papers which have not been previously published, on the subject of economics.

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Number of Results 2

WP(4/2018)263. A New Baseline Model for Estimating Willingness to Pay from Discrete Choice Models

Authors: Carson Richard T., Czajkowski Mikołaj
We show a substantive problem exists with the widely-used ratio of coefficients approach to calculating willingness to pay (WTP) from choice models. The correctly calculated standard error for WTP using this approach is shown to always be infinity. A…

WP263. A New Baseline Model for Estimating Willingness to Pay from Discrete Choice Models

We show a substantive problem exists with the widely-used ratio of coefficients approach to calculating willingness to pay (WTP) from choice models. The correctly calculated standard error for WTP using this approach is shown to always be infinity. A variant of this problem has long been recognized for mixed logit models. We show it occurs even in simple models like the conditional logit used as a baseline reference specification. It occurs because the standard error for the cost parameter implies some possibility that the true parameter value is arbitrarily close to zero. We propose a simple yet elegant way to overcome this problem by reparameterizing the coefficient of the (negative) cost variable to enforce the theoretically correct (and empirically almost always found) positive coefficient using an exponential transformation of the original parameter. This reparameterization enforces the desired restriction that no-part of the confidence region for original cost parameter spans zero. With it the confidence interval for WTP is now finite and well behaved. Our proposed model is straightforward to implement using readily available software. Its log-likelihood value is the same as the usual baseline discrete choice model and we recommend its use as the new standard baseline reference model.


DOI: http://doi.org.10.26405/WP/WNE/2018/263/004
Carson Richard T., Czajkowski Mikołaj
conditional logit confidence intervals contingent valuation delta method discrete choice experiment Krinsky-Robb multinomial logit probit welfare measures

WP(15/2011)55. Overconfident for real? Proper scoring for confidence intervals.

Authors: Krawczyk Michał
Studies show that people tend to provide overly narrow confidence intervals for unknown values. Such a form of overconfidence would have an important impact on financial markets, among other domains, leading i.a. to excessive trading. The present stu…

WP55. Overconfident for real? Proper scoring for confidence intervals.

Studies show that people tend to provide overly narrow confidence intervals for unknown values. Such a form of overconfidence would have an important impact on financial markets, among other domains, leading i.a. to excessive trading. The present study is one of the very few that try to incentivize reporting correct confidence intervals. To this end, a reward scheme is proposed, based on a combination of asymmetric loss functions minimized by appropriate quantiles of a probability distribution. In the experiment I find that incentivized subjects provide wider confidence intervals, obtaining a higher hit rate than the control group. The effect is stronger than that of feedback and explicit warning. These findings suggest that the overly narrow confidence intervals reported elsewhere are partly due to an insufficient mental effort that subjects exert and that they can be induced to do so by the proposed incentive scheme.


Krawczyk Michał
overconfidence calibration confidence intervals proper scoring rules
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