Discrete choice under risk with limited consideration

Levon Barseghyan, Francesca Molinari and Matthew Thirkettle
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Matthew Thirkettle: Institute for Fiscal Studies

No CWP28/20, CeMMAP working papers from Centre for Microdata Methods and Practice, Institute for Fiscal Studies

Abstract: This paper is concerned with learning decision makers’ preferences using data on observed choices from a ?nite set of risky alternatives. We propose a discrete choice model with unobserved heterogeneity in consideration sets and in standard risk aversion. We obtain su?cient conditions for the model’s semi-nonparametric point identi?cation, including in cases where consideration depends on preferences and on some of the exogenous variables. Our method yields an estimator that is easy to compute and is applicable in markets with large choice sets. We illustrate its properties using a dataset on property insurance purchases.

Date: 2020-06-24
New Economics Papers: this item is included in nep-dcm, nep-ecm and nep-ias
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Related works:
Journal Article: Discrete Choice under Risk with Limited Consideration (2021)
Working Paper: Discrete Choice under Risk with Limited Consideration (2021)
Working Paper: Discrete choice under risk with limited consideration (2019)
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