COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1718 Nonparametric Identification of Multinomial Choice Demand Models Steven T. Berry and Philip A. Haile August 2009 We consider identification of nonparametric random utility models of multinomial choice
using "micro data," i.e., observation of the characteristics and choices of
individual consumers. Our model of preferences nests random coefficients discrete choice
models widely used in practice with parametric functional form and distributional
assumptions. However, the model is nonparametric and distribution free. It allows
choice-specific unobservables, endogenous choice characteristics, unknown
heteroskedasticity, and high-dimensional correlated taste shocks. Under standard
"large support" and instrumental variables assumptions, we show identifiability
of the random utility model. We demonstrate robustness of these results to relaxation of
the large support condition and show that when it is replaced with a weaker "common
choice probability" condition, the demand structure is still identified. We show that
key maintained hypotheses are testable. |
