Selectivity correction in discrete-continuous choice analysis: With Empirical Evidence for Vehicle Choice and Use

Abstract In modelling the relationship between the household's demand for consumer durables and their utilisation rate one typically observes the latter only for the chosen durable. The absence of data on the level of ‘consumption’ of the non-chosen durables is a potential source of selectivity bias. There exist many procedures for correcting for selectivity so that predictions of use levels of non-chosen durables can be obtained if one wishes to include use as an influence on durable choice, or if one wants to apply the utilisation model to obtain predictions of use of each type of durable within the class. In this paper we identify the main sources of selectivity and introduce correction formulae that are easy to implement and generalise to polychotomous choice. We assess the empirical implications of the alternative formulae in the context of household vehicle choice and level of use. The data are drawn from 1,436 households in the Sydney Metropolitan Area.

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