NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Identifying Heterogeneity in Economic Choice Models

Jeremy T. Fox, Amit Gandhi

NBER Working Paper No. 15147
Issued in July 2009
NBER Program(s):   IO   LS   PR   TWP

We show how to nonparametrically identify the distribution that characterizes heterogeneity among agents in a general class of structural choice models. We introduce an axiom that we term separability and prove that separability of a structural model ensures identification. The main strength of separability is that it makes verifying the identification of nonadditive models a tractable task because it is a condition that is stated directly in terms of the choice behavior of agents in the model. We use separability to prove several new results. We prove the identification of the distribution of random functions and marginal effects in a nonadditive regression model. We also identify the distribution of utility functions in the multinomial choice model. Finally, we extend 2SLS to have random functions in both the first and second stages. This instrumental variables strategy applies equally to multinomial choice models with endogeneity.

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