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Discrete Choice Models With Multiple Unobserved Choice Characteristics

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  • Susan Athey
  • Guido W. Imbens

Abstract

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. Copyright 2007 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 48 (2007)
Issue (Month): 4 (November)
Pages: 1159-1192

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Handle: RePEc:ier:iecrev:v:48:y:2007:i:4:p:1159-1192

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Cited by:
  1. Christopher T. Conlon & Julie Holland Mortimer, 2010. "Demand Estimation Under Incomplete Product Availability," Boston College Working Papers in Economics, Boston College Department of Economics 799, Boston College Department of Economics, revised 07 Aug 2012.
  2. Steven T. Berry & Philip A. Haile, 2010. "Identification in Differentiated Products Markets Using Market Level Data," NBER Working Papers 15641, National Bureau of Economic Research, Inc.
  3. Burda, Martin & Harding, Matthew & Hausman, Jerry, 2008. "A Bayesian mixed logit-probit model for multinomial choice," Journal of Econometrics, Elsevier, Elsevier, vol. 147(2), pages 232-246, December.
  4. Eric Gautier & Yuichi Kitamura, 2008. "Nonparametric Estimation in Random Coefficients Binary Choice Models," Working Papers, Centre de Recherche en Economie et Statistique 2008-15, Centre de Recherche en Economie et Statistique.
  5. Rohlfs, Chris & Sullivan, Ryan & Kniesner, Thomas J., 2013. "Hedonic Estimation under Very General Conditions Using Experimental and Quasi-Experimental Designs," IZA Discussion Papers 7554, Institute for the Study of Labor (IZA).
  6. Ian M. McCarthy & Rusty Tchernis, 2010. "Search costs and Medicare plan choice," Health Economics, John Wiley & Sons, Ltd., vol. 19(10), pages 1142-1165.
  7. Steven T. Berry & Philip A. Haile, 2009. "Nonparametric Identification of Multinomial Choice Demand Models with Heterogeneous Consumers," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1718, Cowles Foundation for Research in Economics, Yale University, revised Mar 2010.

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