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

54 Pages Posted: 9 Mar 2017 Last revised: 4 Oct 2018

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

In this paper we show that the problem of demand inversion in multinomial choice models is equivalent to the determination of stable outcomes in matching models. This result is very general and applies to random utility models that are not necessarily additive or smooth. Based on this equivalence, we argue that the algorithms for the determination of stable matchings can provide effective computational methods to inverse multinomial choice models, and we give a numerical benchmark of these algorithms. Our approach allows to estimate models that were previously difficult to estimate, such as the pure characteristics model, as well as nonadditive random utility models. The equivalence also allows to exploit the theory of stable matchings in order to describe important properties of the set of utilities solution to the demand inversion problem, and to study the cases of existence and uniqueness of identified utilities, as well as obtain consistency results.

Keywords: Random Utility Models, Two-Sided Matching, Optimal Transport, Pure Characteristics Model, Deferred Acceptance, Partial Identification

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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