Taste heterogeneity, IIA, and the similarity critique
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Author
Contributions
- Ainslie, Andrew - Contributor
- Harvard Business School - Contributor
Publication
2008 - Harvard Business School, Boston, Massachusetts
Language
English
Word Count
6,500 words, Guess
Page Count
26 pages
Identifiers
- OCLC Control Number421982152
- Open LibraryOL50107118M
Description
The purpose of this paper is to show that allowing for taste heterogeneity does not address the similarity critique of discrete-choice models. Although IIA may technically be broken in aggregate, the mixed logit model allows neither a given individual nor the population as a whole to behave with perfect substitution when facing perfect substitutes. Thus, the mixed logit model implies that individuals behave inconsistently across choice sets. Estimating the mixed logit on data in which individuals do behave consistently can result in biased parameter estimates, with the individuals' tastes for desirable attributes being systemically undervalued.
Subjects
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