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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.

Suggested Citation

  • Amil Petrin & Kenneth Train, 2003. "Omitted Product Attributes in Discrete Choice Models," NBER Working Papers 9452, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9452
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    2. James Kau & Donald Keenan & Henry Munneke, 2012. "Racial Discrimination and Mortgage Lending," The Journal of Real Estate Finance and Economics, Springer, vol. 45(2), pages 289-304, August.
    3. Hu, Luojia & Schlosser, Analia, 2014. "Prenatal Sex Selection and Girls’ Well‐Being: Evidence from India," Foerder Institute for Economic Research Working Papers 275836, Tel-Aviv University > Foerder Institute for Economic Research.
    4. Dean V. Williamson, 2010. "Financial-Market Contracting," Chapters,in: The Elgar Companion to Transaction Cost Economics, chapter 24 Edward Elgar Publishing.
    5. Patrick Bayer & Stephen L. Ross, 2006. "Identifying Individual and Group Effects in the Presence of Sorting: A Neighborhood Effects Application," Working papers 2006-13, University of Connecticut, Department of Economics, revised Jan 2009.
    6. Khan, Md. Tajuddin & Kishore, Avinash & Joshi, Pramod Kumar, 2016. "Gender dimensions on farmers’ preferences for direct-seeded rice with drum seeder in India:," IFPRI discussion papers 1550, International Food Policy Research Institute (IFPRI).
    7. 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.
    8. Enrique Schroth & Dezsö Szalay, 2010. "Cash Breeds Success: The Role of Financing Constraints in Patent Races," Review of Finance, European Finance Association, vol. 14(1), pages 73-118.
    9. Nikolaos Artavanis & Adair Morse & Margarita Tsoutsoura, 2015. "Tax Evasion across Industries: Soft Credit Evidence from Greece," NBER Working Papers 21552, National Bureau of Economic Research, Inc.
    10. Harikesh Nair, 2007. "Intertemporal price discrimination with forward-looking consumers: Application to the US market for console video-games," Quantitative Marketing and Economics (QME), Springer, vol. 5(3), pages 239-292, September.
    11. Charles Romeo, 2007. "A Gibbs sampler for mixed logit analysis of differentiated product markets using aggregate data," Computational Economics, Springer;Society for Computational Economics, vol. 29(1), pages 33-68, February.
    12. Dang, Rui, 2015. "Spillover effects of local human capital stock on adult obesity: Evidence from German neighborhoods," Ruhr Economic Papers 585, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    13. Khan, Beethika S., 2004. "Consumer Adoption of Online Banking: Does Distance Matter?," Department of Economics, Working Paper Series qt2bt1d76s, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    14. Joseph Pancras, 2010. "A Framework to Determine the Value of Consumer Consideration Set Information for Firm Pricing Strategies," Computational Economics, Springer;Society for Computational Economics, vol. 35(3), pages 269-300, March.
    15. 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.
    16. Fernández-Antolín, Anna & Guevara, C. Angelo & de Lapparent, Matthieu & Bierlaire, Michel, 2016. "Correcting for endogeneity due to omitted attitudes: Empirical assessment of a modified MIS method using RP mode choice data," Journal of choice modelling, Elsevier, vol. 20(C), pages 1-15.
    17. 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.
    18. Beethika Khan, 2004. "Consumer Adoption of Online Banking: Does Distance Matter?," Development and Comp Systems 0407002, University Library of Munich, Germany.

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    JEL classification:

    • D0 - Microeconomics - - General
    • L0 - Industrial Organization - - General

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