Yogurts Choose Consumers? Estimation of Random Utility Models via Two-Sided Matching

50 Pages Posted: 9 Mar 2017 Last revised: 9 Mar 2019

See all articles by Odran Bonnet

Odran Bonnet

Sciences Po

Alfred Galichon

NYU, Department of Economics and Courant Institute

Keith O'Hara

New York University (NYU)

Matthew Shum

California Institute of Technology

Date Written: May 16, 2018

Abstract

We show that the problem of demand inversion – a crucial step in the estima tion of random utility-based discrete-choice demand and dynamic discrete-choice models – is equivalent to the determination of stable outcomes in matching models. This general result applies to random utility models that are not necessarily additive, smooth, nor even invertible. Based on this equivalence, algorithms for the determination of stable matchings can provide effective computational methods for estimating these models. For discrete choice models which are not invertible, we show that the identified set of utility vectors is a lattice, and the matching algorithms recover sharp upper and lower bounds on the utilities. For models which are invertible, the matching approach permits estimation of models that were previously difficult to estimate, such as the pure characteristics model.

Keywords: random utility models, demand inversion, two-sided matching, discrete choice demand models, partial identification, pure characteristics model

JEL Classification: C51, C60

Suggested Citation

Bonnet, Odran and Galichon, Alfred and O'Hara, Keith and Shum, Matthew, Yogurts Choose Consumers? Estimation of Random Utility Models via Two-Sided Matching (May 16, 2018). Available at SSRN: https://ssrn.com/abstract=2928876 or http://dx.doi.org/10.2139/ssrn.2928876

Odran Bonnet

Sciences Po ( email )

27 rue Saint-Guillaume
Paris Cedex 07, 75337
France

Alfred Galichon

NYU, Department of Economics and Courant Institute ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States

Keith O'Hara

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

Matthew Shum (Contact Author)

California Institute of Technology ( email )

Pasadena, CA 91125
United States

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