Reynaert, Mathias, Xu, Wenxuan and Zhao, Hanlin (2024) Estimating Choice Models with Unobserved Expectations over Attributes. TSE Working Paper, n. 24-1571, Toulouse

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Abstract

When making choices, agents often must form expectations about option attributes in the choice set. The information used to form these expectations is usually unobserved by researchers. We develop a discrete choice model where agents make choices with heterogeneous information sets that are unobserved. We demonstrate that preferences can be point-identified through a finite mixture approximation of the unobserved information structure, or set-identified using knowledge from a single agent type. These approaches are compatible with both individual- and market-level data. Applications include replicating Dickstein and Morales (2018) and estimating consumer valuations for future fuel costs without assumptions on expectation formation.