2007/11/01 by Susan Athey, Guido W. Imbens · 1 citation
Economics, Econometrics and Finance · Business, Management and Accounting · #Economic and Environmental Valuation #Consumer Market Behavior and Pricing #Economics of Agriculture and Food Markets
paper · pdf · doi:10.1111/j.1468-2354.2007.00458.x
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.