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DISCRETE CHOICE MODELS WITH MULTIPLE UNOBSERVED CHOICE CHARACTERISTICS *
Author(s) -
Athey Susan,
Imbens Guido W.
Publication year - 2007
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2007.00458.x
Subject(s) - discrete choice , utility maximization , econometrics , multinomial distribution , multinomial logistic regression , function (biology) , monotone polygon , computer science , economics , revealed preference , maximization , choice set , microeconomics , mathematical economics , mathematics , machine learning , geometry , evolutionary biology , biology
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.