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The confounding effects of consumer heterogeneity on model-based inference of attribute non-attendance

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  • Hong il Yoo

    () (University of New South Wales)

Abstract

Several empirical studies conclude that a majority of economic agents ignore some of observed product attributes when choosing among discrete alternatives. Many of these ndings are based on latent class logit with partially constrained support points wherein the share of each point is interpreted as the probability of ignoring particular attribute(s). We note that because the logit kernel is mixed over these points to approximate unmodeled interpersonal taste variation during the estimation stage, the interpretation of estimated shares is necessarily ambiguous. Using simulated examples, we explain why common forms of unobserved consumer heterogeneity can be confounded with attribute non-attendance.

Suggested Citation

  • Hong il Yoo, 2012. "The confounding effects of consumer heterogeneity on model-based inference of attribute non-attendance," Discussion Papers 2012-47, School of Economics, The University of New South Wales.
  • Handle: RePEc:swe:wpaper:2012-47
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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2012-47.pdf
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    Keywords

    attribute non-attendance; gmnl; latent class; consumer heterogeneity; mixed logit; information processing rule;

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access

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