Inference of Preference Heterogeneity from Choice Data

42 Pages Posted: 13 Mar 2017 Last revised: 17 Jan 2018

Annie Liang

University of Pennsylvania - Department of Economics

Date Written: January 16, 2018

Abstract

Suppose that an analyst observes inconsistent choices from either a single decision-maker, or a population of agents. Can the analyst determine whether this inconsistency arises from choice error (imperfect maximization of a single preference) or from preference heterogeneity (deliberate maximization of multiple preferences)? I model choice data as generated from a perturbation of a "sparse" random utility model, whose support is a small number of underlying preferences. I show that (a) simultaneously minimizing the number of inferred preferences and the number of unexplained observations can exactly recover the number of underlying preferences with high probability; (b) simultaneously minimizing the richness of the set of preferences and the number of unexplained observations can exactly recover the choice implications of the underlying preferences with high probability.

Keywords: choice data, multiple rationales, revealed preference, heterogneity, identifiability

Suggested Citation

Liang, Annie, Inference of Preference Heterogeneity from Choice Data (January 16, 2018). Available at SSRN: https://ssrn.com/abstract=2931848 or http://dx.doi.org/10.2139/ssrn.2931848

Annie Liang (Contact Author)

University of Pennsylvania - Department of Economics ( email )

160 McNeil Building
3718 Locust Walk
Philadelphia, PA 19104
United States

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