Title: Demand estimation with unobserved choice set heterogeneity
Abstract:We present a method to estimate preferences in the presence of unobserved choice set heterogeneity. We build on the insights of Chamberlain's Fixed-Effect Logit and exploit information in observed pur...We present a method to estimate preferences in the presence of unobserved choice set heterogeneity. We build on the insights of Chamberlain's Fixed-Effect Logit and exploit information in observed purchase decisions in either panel or cross-section environments to construct sufficient sets of choices that lie within consumers' true but unobserved choice sets. This allows us to recover preference parameters without having to specify the process of choice set formation. We illustrate our ideas by estimating demand for chocolate bars on-the-go using individual-level data from the UK. Our results show that failing to account for unobserved choice set heterogeneity can lead to statistically and economically significant biases in the estimation of preference parameters.Read More
Publication Year: 2016
Publication Date: 2016-12-05
Language: en
Type: preprint
Indexed In: ['crossref']
Access and Citation
Cited By Count: 7
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