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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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  1. Steven Berry & James Levinsohn & Ariel Pakes, 1998. "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market," NBER Working Papers 6481, National Bureau of Economic Research, Inc.
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  9. Daniel McFadden, 1977. "Modelling the Choice of Residential Location," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 477, Cowles Foundation for Research in Economics, Yale University.
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  11. Austan Goolsbee & Amil Petrin, 2004. "The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable TV," Econometrica, Econometric Society, Econometric Society, vol. 72(2), pages 351-381, 03.
  12. Amil Petrin, 2002. "Quantifying the Benefits of New Products: The Case of the Minivan," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(4), pages 705-729, August.
  13. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, Econometric Society, vol. 63(4), pages 841-90, July.
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  16. Kenneth Train, 2001. "Halton Sequences for Mixed Logit," Econometrics, EconWPA 0012002, EconWPA.
  17. Pinar Karaca-Mandic & Kenneth Train, 2003. "Standard error correction in two-stage estimation with nested�samples," Econometrics Journal, Royal Economic Society, Royal Economic Society, vol. 6(2), pages 401-407, December.
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Cited by:
  1. Charles Romeo, 2007. "A Gibbs sampler for mixed logit analysis of differentiated product markets using aggregate data," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 29(1), pages 33-68, February.
  2. 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.
  3. Harikesh Nair, 2007. "Intertemporal price discrimination with forward-looking consumers: Application to the US market for console video-games," Quantitative Marketing and Economics, Springer, Springer, vol. 5(3), pages 239-292, September.
  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. 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.
  6. Beethika Khan, 2004. "Consumer Adoption of Online Banking: Does Distance Matter?," Development and Comp Systems 0407002, EconWPA.
  7. Han Kim, E & Morse, Adair & Zingales, Luigi, 2006. "Are Elite Universities Losing their Competitive Edge?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5700, C.E.P.R. Discussion Papers.
  8. 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, Springer, vol. 16(3), pages 225-237, December.
  9. 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, CRISEI, University of Naples "Parthenope", Italy 4_2012, CRISEI, University of Naples "Parthenope", Italy.
  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, Society for Computational Economics, vol. 35(3), pages 269-300, March.
  11. Khan, Beethika S., 2004. "Consumer Adoption of Online Banking: Does Distance Matter?," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt2bt1d76s, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  12. James Kau & Donald Keenan & Henry Munneke, 2012. "Racial Discrimination and Mortgage Lending," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 45(2), pages 289-304, August.

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