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Omitted Product Attributes in Discrete Choice Models

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  • Amil Petrin
  • Kenneth Train

Abstract

We describe two methods for correcting an omitted variables problem in discrete choice models: a fixed effects approach and a control function approach. The control function approach is easier to implement and applicable in situations for which the fixed effects approach is not. We apply both methods to a cross-section of disaggregate data on customer's choice among television options including cable, satellite, and antenna. As theory predicts, the estimated price response rises substantially when either correction is applied. All of the estimated parameters and the implied price elasticities are very similar for both methods.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9452.

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Date of creation: Jan 2003
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Handle: RePEc:nbr:nberwo:9452

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Cited by:
  1. Kim, E. Han & Morse, Adair & Zingales, Luigi, 2009. "Are elite universities losing their competitive edge?," Journal of Financial Economics, Elsevier, vol. 93(3), pages 353-381, September.
  2. Charles Romeo, 2007. "A Gibbs sampler for mixed logit analysis of differentiated product markets using aggregate data," Computational Economics, Society for Computational Economics, vol. 29(1), pages 33-68, February.
  3. Maria Rosaria Carillo & Erasmo Papagni & Alessandro Sapio, 2012. "Do collaborations enhance the high-quality output of scientific institutions? Evidence from the Italian Research Assessment Exercise (2001-2003)," Discussion Papers 4_2012, CRISEI, University of Naples "Parthenope", Italy.
  4. Schroth, Enrique & Szalay, Dezsö, 2008. "Cash Breeds Success : The Role of Financing Constraints in Patent Races," The Warwick Economics Research Paper Series (TWERPS) 873, University of Warwick, Department of Economics.
  5. Tülin Erdem & Kannan Srinivasan & Wilfred Amaldoss & Patrick Bajari & Hai Che & Teck Ho & Wes Hutchinson & Michael Katz & Michael Keane & Robert Meyer & Peter Reiss, 2005. "Theory-Driven Choice Models," Marketing Letters, Springer, vol. 16(3), pages 225-237, December.
  6. Mohammad Arzaghi, 2005. "Quality Sorting and Networking: Evidence from the Advertising Agency Industry," Working Papers 05-16, Center for Economic Studies, U.S. Census Bureau.
  7. Nair, Harikesh, S., 2006. "Intertemporal Price Discrimination with Forward-Looking Consumers: Application to the US Market for Console Video-Games," Research Papers 1947, Stanford University, Graduate School of Business.
  8. Patrick Bayer & Stephen L. Ross, 2006. "Identifying Individual and Group Effects in the Presence of Sorting: A Neighborhood Effects Application," NBER Working Papers 12211, National Bureau of Economic Research, Inc.
  9. Beethika Khan, 2004. "Consumer Adoption of Online Banking: Does Distance Matter?," Development and Comp Systems 0407002, EconWPA.
  10. Joseph Pancras, 2010. "A Framework to Determine the Value of Consumer Consideration Set Information for Firm Pricing Strategies," Computational Economics, Society for Computational Economics, vol. 35(3), pages 269-300, March.

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