Omitted Product Attributes in Discrete Choice Models

Amil Petrin and Kenneth Train ()

No 9452, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D0 L0 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm and nep-ure
Date: 2003-01
Note: IO
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