Omitted Product Attributes in Discrete Choice Models

28 Pages Posted: 16 Jan 2003 Last revised: 22 Jan 2003

See all articles by Amil Petrin

Amil Petrin

University of Minnesota - Duluth; National Bureau of Economic Research (NBER)

Kenneth E. Train

affiliation not provided to SSRN

Date Written: January 2003

Abstract

We describe two methods for correcting an omitted variables problem in discrete choice models: a fixed effects approach and a control function approach. The control function approach is easier to implement and applicable in situations for which the fixed effects approach is not. We apply both methods to a cross-section of disaggregate data on customer's choice among television options including cable, satellite, and antenna. As theory predicts, the estimated price response rises substantially when either correction is applied. All of the estimated parameters and the implied price elasticities are very similar for both methods.

Suggested Citation

Petrin, Amil and Train, Kenneth E., Omitted Product Attributes in Discrete Choice Models (January 2003). NBER Working Paper No. w9452. Available at SSRN: https://ssrn.com/abstract=370436

Amil Petrin (Contact Author)

University of Minnesota - Duluth ( email )

1049 University Drive
Duluth, MN 55812
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kenneth E. Train

affiliation not provided to SSRN

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