IDEAS home Printed from https://ideas.repec.org/p/ore/uoecwp/2003-7.html
   My bibliography  Save this paper

Test of Choice Set Misspecification for Discrete Models of Consumer Choice

Author

Listed:
  • J.R. DeShazo

    () (Department of Policy Studies, UCLA)

  • Trudy Ann Cameron

    () (Department of Economics, University of Oregon)

  • Manrique Saenz

    (Central Bank of Costa Rica)

Abstract

We develop and evaluate a test of choice set misspecification for a multinomial logit choice model. This test determines whether the choice set designated by the researcher mistakenly assigns relevant substitutes to the numeraire good. We develop this test by generalizing the traditional McFadden-type conditional logit model to evaluate whether the traditional model is conditioned on an overly restrictive set of substitution possibilities. The test has a convenient feature: while it requires information on potentially relevant, but omitted, substitute goods, it does not require the researcher to observe consumers choices among these omitted potential substitutes if they select the numeraire good (which contains these omitted substitutes). A comparison of the traditional multinomial logit choice model and our more general model suggests that choice set misspecification may produce biased parameters that distort welfare estimates to a consequential extent.

Suggested Citation

  • J.R. DeShazo & Trudy Ann Cameron & Manrique Saenz, 2001. "Test of Choice Set Misspecification for Discrete Models of Consumer Choice," University of Oregon Economics Department Working Papers 2003-7, University of Oregon Economics Department, revised 05 Nov 2001.
  • Handle: RePEc:ore:uoecwp:2003-7
    as

    Download full text from publisher

    File URL: http://economics.uoregon.edu/papers/UO-2003-7_DeShazo_Cameron_Saenz_Misspecification.pdf
    Download Restriction: no

    More about this item

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • Q26 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Recreational Aspects of Natural Resources

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ore:uoecwp:2003-7. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bill Harbaugh). General contact details of provider: http://edirc.repec.org/data/deuorus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.