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Preference Estimation with Unobserved Choice Set Heterogeneity using Sufficient Sets

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  • Griffith, Rachel
  • Crawford, Gregory
  • Iaria, Alessandro

Abstract

This paper introduces "sufficient sets'' and shows how they can address unobserved choice set heterogeneity. Motivated by economic theory, a sufficient set is a combination of a consumer's observed choices that is a subset of their true but unobserved choice set. We introduce a Sufficient Set logit that "differences out'' consumers' true choice sets, permitting consistent parameter estimation, and show how to use sufficient sets to semi-parametrically estimate preferences and lessen the computational burden of methods that integrate over the distribution of choice sets. We illustrate our ideas using Monte Carlo simulations and by estimating demand for chocolate in the UK.

Suggested Citation

  • Griffith, Rachel & Crawford, Gregory & Iaria, Alessandro, 2016. "Preference Estimation with Unobserved Choice Set Heterogeneity using Sufficient Sets," CEPR Discussion Papers 11675, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11675
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    5. Assele, Samson Yaekob & Meulders, Michel & Vandebroek, Martina, 2022. "The value of consideration data in a discrete choice experiment," Journal of choice modelling, Elsevier, vol. 45(C).
    6. Lu, Zhentong, 2022. "Estimating multinomial choice models with unobserved choice sets," Journal of Econometrics, Elsevier, vol. 226(2), pages 368-398.
    7. Jason Abaluck & Abi Adams, 2017. "What do consumers consider before they choose? Identification from asymmetric demand responses," IFS Working Papers W17/09, Institute for Fiscal Studies.
    8. Valentino Dardanoni & Paola Manzini & Marco Mariotti & Christopher J. Tyson, 2020. "Inferring Cognitive Heterogeneity From Aggregate Choices," Econometrica, Econometric Society, vol. 88(3), pages 1269-1296, May.
    9. Taburet, Arthur & Polo, Alberto & Vo, Quynh-Anh, 2024. "Screening using a menu of contracts: a structural model of lending markets," Bank of England working papers 1057, Bank of England.

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    More about this item

    Keywords

    Unobserved choice set heterogeneity; Discrete choice demand estimation; Sufficient sets; Attention; Search; Endogenous product choice;
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