Estimating Choice Models with Unobserved Expectations over Attributes

Mathias Reynaert, Wenxuan Xu and Hanlin Zhao
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Mathias Reynaert: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse
Wenxuan Xu: Unknown
Hanlin Zhao: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse

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Abstract: Agents often make choices by forming expectations about attributes, but such expectations are usually unobserved by researchers. We develop two methods for estimating discrete choice models where agents use unobserved heterogeneous information sets to form expectations. Preferences are point-identified using a finite mixture approximation of the unobserved information structure or set-identified with partial information. Both methods apply to individual- and market-level data without imposing strong assumptions on how expectations are formed. We revisit two empirical applications that confirm the importance of accounting for unobserved information: firms' revenue expectations when exporting and consumers' fuel cost expectations when purchasing cars.

Keywords: Discrete choice; Unobserved information; Mixture model; Set identification (search for similar items in EconPapers)
Date: 2025-04-11
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