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Discrete Choice Models with Multiple Unobserved Choice Characteristics

34 Pages Posted: 13 Dec 2007  

Susan Athey

Stanford Graduate School of Business

Guido W. Imbens

Stanford Graduate School of Business

Abstract

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.

Suggested Citation

Athey, Susan and Imbens, Guido W., Discrete Choice Models with Multiple Unobserved Choice Characteristics. International Economic Review, Vol. 48, Issue 4, pp. 1159-1192, November 2007. Available at SSRN: https://ssrn.com/abstract=1071227 or http://dx.doi.org/10.1111/j.1468-2354.2007.00458.x

Susan Carleton Athey (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Guido W. Imbens

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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