Discrete Choice under Risk with Limited Consideration

This paper is concerned with learning decision-makers’ preferences using data on observed choices from a finite set of risky alternatives. We propose a discrete choice model with unobserved heterogeneity in consideration sets and in standard risk aversion. We obtain sufficient conditions for the model’s semi-nonparametric point identification, 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. (JEL D81, D83, D91, G22, G52)

• Publication year

  2019

• Venue

  The American Economic Review

• Publication date

  2019-02-18

• Fields of study

  Economics

• Identifiers
  DOI 10.1920/WP.CEM.2020.2820arXiv 1902.06629
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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