Discrete Choice Models with Multiple Unobserved Choice Characteristics

Since the pioneering work by Daniel McFadden, utility-maximization-based multinomial response models have become important tools of empirical researchers. Various generalizations of these models have been developed to allow for unobserved heterogeneity in taste parameters and choice characteristics. Here we investigate how rich a specification of the unobserved components is needed to rationalize arbitrary choice patterns in settings with many individual decision makers, multiple markets, and large choice sets. We find that if one restricts the utility function to be monotone in the unobserved choice characteristics, then up to two unobserved choice characteristics may be needed to rationalize the choices.

[1]  W. Wong,et al.  The calculation of posterior distributions by data augmentation , 1987 .

[2]  Ron Shachar,et al.  Spatial Competition in the Network Television Industry , 2001 .

[3]  Aviv Nevo.  Measuring Market Power in the Ready-to-Eat Cereal Industry , 1998 .

[4]  A. O'Hagan,et al.  The Calculation of Posterior Distributions by Data Augmentation: Comment , 1987 .

[5]  D. Pollard,et al.  Simulation and the Asymptotics of Optimization Estimators , 1989 .

[6]  Daniel A. Ackerberg.  Advertising, Learning, and Consumer Choice in Experience Good Markets: A Structural Empirical Examin , 2003 .

[7]  K. T. Poole,et al.  A Spatial Model for Legislative Roll Call Analysis , 1985 .

[8]  Steven T. Berry,et al.  Automobile Prices in Market Equilibrium , 1995 .

[9]  Peter J. Rousseeuw,et al.  Robust Regression and Outlier Detection , 2005, Wiley Series in Probability and Statistics.

[10]  Aviv Nevo.  A Practitioner's Guide to Estimation of Random‐Coefficients Logit Models of Demand , 2000 .

[11]  M. Keane.  Modeling Heterogeneity and State Dependence in Consumer Choice Behavior , 1997 .

[12]  D. McFadden.  A Method of Simulated Moments for Estimation of Discrete Response Models Without Numerical Integration , 1989 .

[13]  P. Goldberg.  Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry , 1995 .

[14]  Peter E. Rossi,et al.  A Bayesian analysis of the multinomial probit model with fully identified parameters , 2000 .

[15]  Michael P. Keane,et al.  A model of health plan choice:: Inferring preferences and perceptions from a combination of revealed preference and attitudinal data , 1998 .

[16]  D. McFadden.  Econometric Models of Probabilistic Choice , 1981 .

[17]  John Geweke,et al.  Posterior simulators in econometrics , 1995 .

[18]  K. Train.  Discrete Choice Methods with Simulation , 2003 .

[19]  Steven Berry,et al.  The Pure Characteristics Demand Model , 2007 .

[20]  Daniel A. Ackerberg.  Empirically Distinguishing Informative and Prestige Effects of Advertising , 2001 .

[21]  The Pure Characteristics Discrete Choice Model of Differentiated Products Demand still preliminary , 2002 .

[22]  Peter E. Rossi,et al.  The Value of Purchase History Data in Target Marketing , 1996 .

[23]  Marc Rysman,et al.  Unobserved Product Differentiation in Discrete Choice Models: Estimating Price Elasticities and Welfare Effects , 2002 .

[24]  Takeshi Amemiya,et al.  Qualitative Response Models , 1975 .

[25]  Steven T. Berry.  Estimating Discrete-Choice Models of Product Differentiation , 1994 .

[26]  A Gibbs sampler for mixed logit analysis of differentiated product markets using aggregate data , 2007 .

[27]  Kenneth E. Train,et al.  Discrete Choice Methods with Simulation , 2016 .

[28]  J. Kadane.  Structural Analysis of Discrete Data with Econometric Applications , 1984 .

[29]  Daniel A. Ackerberg.  Advertising, Learning, and Consumer Choice in Experience Good Markets: An Empirical Examination , 2003 .

[30]  Greg M. Allenby,et al.  Bayesian Analysis of Simultaneous Demand and Supply , 2003 .

[31]  M. Keane.  Modeling Health Insurance Choice Using the Heterogeneous Logit Model , 2004 .

[32]  Peter E. Rossi,et al.  An exact likelihood analysis of the multinomial probit model , 1994 .

[33]  Peter E. Rossi,et al.  Product Attributes and Models of Multiple Discreteness , 2006 .

[34]  John Geweke,et al.  Bayesian inference for dynamic choice models without the need for dynamic programming , 1996 .

[35]  Amil Petrin.  Quantifying the Benefits of New Products: The Case of the Minivan , 2001, Journal of Political Economy.

[36]  David B. Dunson,et al.  Bayesian Data Analysis , 2010 .

[37]  Peter E. Rossi,et al.  Bayesian Statistics and Marketing , 2005 .

[38]  M. Tanner.  Tools for statistical inference: methods for the exploration of posterior distributions and likeliho , 1994 .

[39]  D. McFadden.  Conditional logit analysis of qualitative choice behavior , 1972 .

[40]  Manuel Trajtenberg,et al.  Market Segmentation and the Sources of Rents from Innovation: Personal Computers in the Late 1980&Apos;S , 1996 .

[41]  S. Chib,et al.  Analysis of multivariate probit models , 1998 .

[42]  Siddhartha Chib,et al.  MARKOV CHAIN MONTE CARLO METHODS: COMPUTATION AND INFERENCE , 2001 .

[43]  Edward E. Leamer,et al.  Econometric Tools for Analyzing Market Outcomes , 2007 .

[44]  Steven Berry,et al.  Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market , 1998, Journal of Political Economy.

[45]  M. A. Tanner,et al.  Tools for Statistical Inference: Methods for the Exploration of Posterior Distributions and Likelihood Functions, 3rd Edition , 1998 .

[46]  Simon Jackman,et al.  Multidimensional Analysis of Roll Call Data via Bayesian Simulation: Identification, Estimation, Inference, and Model Checking , 2001, Political Analysis.

[47]  C. Manski.  Partial Identification of Probability Distributions , 2003 .

[48]  Patrick Bajari,et al.  Discrete Choice Models as Structural Models of Demand: Some Economic Implications of Common Approaches , 2001 .

[49]  Steven Berry,et al.  Limit Theorems for Estimating the Parameters of Differentiated Product Demand Systems , 2000 .

[50]  Peter E. Rossi,et al.  Bayesian Statistics and Marketing: Rossi/Bayesian Statistics and Marketing , 2006 .

[51]  Peter J. Rousseeuw,et al.  Robust regression and outlier detection , 1987 .

[52]  D. McFadden,et al.  Specification tests for the multinomial logit model , 1984 .

[53]  D. McFadden.  Econometric analysis of qualitative response models , 1984 .

[54]  Terry Elrod,et al.  A Factor-Analytic Probit Model for Representing the Market Structure in Panel Data , 1995 .

[55]  M. Osborne.  Consumer Learning , Habit Formation , and Heterogeneity : A Structural Examination , 2005 .