Mixed Logit Model Performance and Distributional Assumptions: Preferences and GM foods

Using mixed logit models to analyse choice data is common but requires ex ante specification of the functional forms of preference distributions. We make the case for greater use of bounded functional forms and propose the use of the Marginal Likelihood, calculated using Bayesian techniques, as a single measure of model performance across non nested mixed logit specifications. Using this measure leads to very different rankings of model specifications compared to alternative rule of thumb measures. The approach is illustrated using data from a choice experiment regarding GM food types which provides insights regarding the recent WTO dispute between the EU and the US, Canada and Argentina and whether labelling and trade regimes should be based on the production process or product composition.

Coupled simulations of the Indian monsoon intraseasonal oscillation using a fine-resolution mixed-layer ocean model

The intraseasonal variability (ISV) of the Indian summer monsoon is dominated by a 30–50 day oscillation between “active” and “break” events of enhanced and reduced rainfall over the subcontinent, respectively. These organized convective events form in the equatorial Indian Ocean and propagate north to India. Atmosphere–ocean coupled processes are thought to play a key role the intensity and propagation of these events. A high-resolution, coupled atmosphere–mixed-layer-oceanmodel is assembled: HadKPP. HadKPP comprises the Hadley Centre Atmospheric Model (HadAM3) and the K Profile Parameterization (KPP) mixed-layer ocean model. Following studies that upper-ocean vertical resolution and sub-diurnal coupling frequencies improve the simulation of ISV in SSTs, KPP is run at 1 m vertical resolution near the surface; the atmosphere and ocean are coupled every three hours. HadKPP accurately simulates the 30–50 day ISV in rainfall and SSTs over India and the Bay of Bengal, respectively, but suffers from low ISV on the equator. This is due to the HadAM3 convection scheme producing limited ISV in surface fluxes. HadKPP demonstrates little of the observed northward propagation of intraseasonal events, producing instead a standing oscillation. The lack of equatorial ISV in convection in HadAM3 constrains the ability of KPP to produce equatorial SST anomalies, which further weakens the ISV of convection. It is concluded that while atmosphere–ocean interactions are undoubtedly essential to an accurate simulation of ISV, they are not a panacea for model deficiencies. In regions where the atmospheric forcing is adequate, such as the Bay of Bengal, KPP produces SST anomalies that are comparable to the Tropical Rainfall Measuring Mission Microwave Imager (TMI) SST analyses in both their magnitude and their timing with respect to rainfall anomalies over India. HadKPP also displays a much-improved phase relationship between rainfall and SSTs over a HadAM3 ensemble forced by observed SSTs, when both are compared to observations. Coupling to mixed-layer models such as KPP has the potential to improve operational predictions of ISV, particularly when the persistence time of SST anomalies is shorter than the forecast lead time.

A practical approach to a multi-level analysis with a sparse binary outcome within a large surgical trial

Objectives: To assess the potential source of variation that surgeon may add to patient outcome in a clinical trial of surgical procedures. Methods: Two large (n = 1380) parallel multicentre randomized surgical trials were undertaken to compare laparoscopically assisted hysterectomy with conventional methods of abdominal and vaginal hysterectomy; involving 43 surgeons. The primary end point of the trial was the occurrence of at least one major complication. Patients were nested within surgeons giving the data set a hierarchical structure. A total of 10% of patients had at least one major complication, that is, a sparse binary outcome variable. A linear mixed logistic regression model (with logit link function) was used to model the probability of a major complication, with surgeon fitted as a random effect. Models were fitted using the method of maximum likelihood in SAS((R)). Results: There were many convergence problems. These were resolved using a variety of approaches including; treating all effects as fixed for the initial model building; modelling the variance of a parameter on a logarithmic scale and centring of continuous covariates. The initial model building process indicated no significant 'type of operation' across surgeon interaction effect in either trial, the 'type of operation' term was highly significant in the abdominal trial, and the 'surgeon' term was not significant in either trial. Conclusions: The analysis did not find a surgeon effect but it is difficult to conclude that there was not a difference between surgeons. The statistical test may have lacked sufficient power, the variance estimates were small with large standard errors, indicating that the precision of the variance estimates may be questionable.

Stated attribute non-attendance in successive choice experiments

Attribute non-attendance in choice experiments affects WTP estimates and therefore the validity of the method. A recent strand of literature uses attenuated estimates of marginal utilities of ignored attributes. Following this approach, we propose a generalisation of the mixed logit model whereby the distribution of marginal utility coefficients of a stated non-attender has a potentially lower mean and lower variance than those of a stated attender. Model comparison shows that our shrinkage approach fits the data better and produces more reliable WTP estimates. We further find that while reliability of stated attribute non-attendance increases in successive choice experiments, it does not increase when respondents report having ignored the same attribute twice.

A statistical model for sea surface diurnal warming driven by numercial weather predictions fluxes and winds

A statistical model is derived relating the diurnal variation of sea surface temperature (SST) to the net surface heat flux and surface wind speed from a numerical weather prediction (NWP) model. The model is derived using fluxes and winds from the European Centre for Medium-Range Weather Forecasting (ECMWF) NWP model and SSTs from the Spinning Enhanced Visible and Infrared Imager (SEVIRI). In the model, diurnal warming has a linear dependence on the net surface heat flux integrated since (approximately) dawn and an inverse quadratic dependence on the maximum of the surface wind speed in the same period. The model coefficients are found by matching, for a given integrated heat flux, the frequency distributions of the maximum wind speed and the observed warming. Diurnal cooling, where it occurs, is modelled as proportional to the integrated heat flux divided by the heat capacity of the seasonal mixed layer. The model reproduces the statistics (mean, standard deviation, and 95-percentile) of the diurnal variation of SST seen by SEVIRI and reproduces the geographical pattern of mean warming seen by the Advanced Microwave Scanning Radiometer (AMSR-E). We use the functional dependencies in the statistical model to test the behaviour of two physical model of diurnal warming that display contrasting systematic errors.

Location choices of multinational firms in Europe: the role of EU cohesion policy

Using data on 5509 foreign subsidiaries established in 50 regions of 8 EU countries over the period 1991–1999, we estimate a mixed logit model of the location choice of multinational firms in Europe. In particular, we focus on the role of EU Cohesion Policy in attracting foreign investors from both within and outside Europe. We find that, after controlling for the role of agglomeration economies as well as a number of other regional and country characteristics and allowing for a very flexible correlation pattern among choices, Structural and Cohesion funds allocated by the EU to laggard regions have indeed contributed to attracting multinationals. These policies as well as other determinants play a different role in the case of European investors as opposed to non-European ones.

Bayesian estimation of willingness-to-pay where respondents mis-report their preferences

We introduce a modified conditional logit model that takes account of uncertainty associated with mis-reporting in revealed preference experiments estimating willingness-to-pay (WTP). Like Hausman et al. [Journal of Econometrics (1988) Vol. 87, pp. 239-269], our model captures the extent and direction of uncertainty by respondents. Using a Bayesian methodology, we apply our model to a choice modelling (CM) data set examining UK consumer preferences for non-pesticide food. We compare the results of our model with the Hausman model. WTP estimates are produced for different groups of consumers and we find that modified estimates of WTP, that take account of mis-reporting, are substantially revised downwards. We find a significant proportion of respondents mis-reporting in favour of the non-pesticide option. Finally, with this data set, Bayes factors suggest that our model is preferred to the Hausman model.

Modifying willingness to pay estimates where respondents mis-report their preferences

The likelihood for the Logit model is modified, so as to take account of uncertainty associated with mis-reporting in stated preference experiments estimating willingness to pay (WTP). Monte Carlo results demonstrate the bias imparted to estimates where there is mis-reporting. The approach is applied to a data set examining consumer preferences for food produced employing a nonpesticide technology. Our modified approach leads to WTP that are substantially downwardly revised.

An investigation into factors affecting the occupational choices of nominated farm heirs in Ireland

The resilience of family farming is an important feature of the structure of the farming industry in many countries, due largely to the 'smooth' succession of farms from one generation to the next. The stability of this structure is now threatened by the widening gap between the income expected from farming when compared with non-farming occupations in an economy like Ireland, operating at almost full employment. Nominated farm heirs are increasingly unlikely to choose full-time farming as their preferred occupation. To identify the factors that affect this occupational choice, a multinomial logit model is developed and applied to Irish data to examine the farm, economic and personal characteristics that influence a nominated heir's decision to enter farming as opposed to some non-farming occupation. The results show a significant negative relationship between higher education and the choice of full-time farming as an occupation. The interdependence between education and occupational choices is further explored using a bivariate probit model. The main findings are: the occupational choice and the decision to continue with higher education are made jointly; the nominated heirs on more profitable farms are less likely to pursue tertiary education and therefore more likely to enter full-time farming. The model developed is sufficiently general for studying the phenomenon of succession on farms.

Designer buildings: an evaluation of the price impacts of signature architects

This study investigates whether commercial offices designed by signature architects in the United States achieve rental premiums compared to commercial offices designed by nonsignature architects. Focusing on buildings designed by winners of the Prizker Prize and the Gold Medal awarded by the American Institute of Architects, we create a sample of commercial office buildings designed by signature architects drawing on CoStar's national database. We use a combination of hedonic regression model and a logit model to estimate the various rent determinants. While the first stage measures the typical rental price differential above the typical building in a particular sub-market over a specific timeframe, the second stage identifies a potential price differential over a set of buildings closely matched on important characteristics (such as age, size, location etc.). We find that in both stages offices design by signature architects exhibit a premium. However these results are preliminary. The premium could be indeed an effect of the name of the architect, but others factors such as micro-market conditions might be the cause. Further tests are needed to confirm the validity of our results.

National boundaries and the location of multinational firms in Europe

Using data on 5,102 subsidiaries established in the period 1991–1999, we examine the location choice of multinational firms of different nationalities in 47 regions of five EU countries. In particular we estimate a nested logit model and find that European multinationals consider regions across different countries as relatively closer substitutes than regions within national borders. This is consistent with the hypothesis that European regions compete to attract foreign direct investments relatively more across than within countries. However, in line with previous studies, we also find that national boundaries still play some role in choices made by non-European multinationals.

Model selection for the mixed logit with Bayesian estimation

In this paper, the mixed logit (ML) using Bayesian methods was employed to examine willingness-to-pay (WTP) to consume bread produced with reduced levels of pesticides so as to ameliorate environmental quality, from data generated by a choice experiment. Model comparison used the marginal likelihood, which is preferable for Bayesian model comparison and testing. Models containing constant and random parameters for a number of distributions were considered, along with models in ‘preference space’ and ‘WTP space’ as well as those allowing for misreporting. We found: strong support for the ML estimated in WTP space; little support for fixing the price coefficient a common practice advocated and adopted in the environmental economics literature; and, weak evidence for misreporting.

Evaluation of a large-eddy model simulation of a mixed-phase altocumulus cloud using microwave radiometer, lidar and Doppler radar data

Using the Met Office large-eddy model (LEM) we simulate a mixed-phase altocumulus cloud that was observed from Chilbolton in southern England by a 94 GHz Doppler radar, a 905 nm lidar, a dual-wavelength microwave radiometer and also by four radiosondes. It is important to test and evaluate such simulations with observations, since there are significant differences between results from different cloud-resolving models for ice clouds. Simulating the Doppler radar and lidar data within the LEM allows us to compare observed and modelled quantities directly, and allows us to explore the relationships between observed and unobserved variables. For general-circulation models, which currently tend to give poor representations of mixed-phase clouds, the case shows the importance of using: (i) separate prognostic ice and liquid water, (ii) a vertical resolution that captures the thin layers of liquid water, and (iii) an accurate representation the subgrid vertical velocities that allow liquid water to form. It is shown that large-scale ascents and descents are significant for this case, and so the horizontally averaged LEM profiles are relaxed towards observed profiles to account for these. The LEM simulation then gives a reasonable. cloud, with an ice-water path approximately two thirds of that observed, with liquid water at the cloud top, as observed. However, the liquid-water cells that form in the updraughts at cloud top in the LEM have liquid-water paths (LWPs) up to half those observed, and there are too few cells, giving a mean LWP five to ten times smaller than observed. In reality, ice nucleation and fallout may deplete ice-nuclei concentrations at the cloud top, allowing more liquid water to form there, but this process is not represented in the model. Decreasing the heterogeneous nucleation rate in the LEM increased the LWP, which supports this hypothesis. The LEM captures the increase in the standard deviation in Doppler velocities (and so vertical winds) with height, but values are 1.5 to 4 times smaller than observed (although values are larger in an unforced model run, this only increases the modelled LWP by a factor of approximately two). The LEM data show that, for values larger than approximately 12 cm s(-1), the standard deviation in Doppler velocities provides an almost unbiased estimate of the standard deviation in vertical winds, but provides an overestimate for smaller values. Time-smoothing the observed Doppler velocities and modelled mass-squared-weighted fallspeeds shows that observed fallspeeds are approximately two-thirds of the modelled values. Decreasing the modelled fallspeeds to those observed increases the modelled IWC, giving an IWP 1.6 times that observed.