Choice model simulation
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Simulation of choice models requires attention to issues that arise when the researcher attempts to simulate some choice models with an actual data set.
Defining Choice Set
A Choice Set in discrete choice models is defined to be finite, exhaustive, and mutually exclusive. For instance, consider households’ choice of how many laptops to own. The researcher can define the choice set depending on the nature of the data and the interpretation they wish to draw, as long as it satisfies three properties mentioned above. Some examples of choice sets that meet the categories are the following:
- 0 , 1, More than 1 laptop
- 0 , 1 , 2 , More than 2 laptops
- Less than 2 , 2 , 3 , 4 , More than 4 laptops
Models
Defining Consumer Utility
References
A Nevo (2000). "Practitioners Guide to Estimation of Random Coefficients Logit Models of Demand,” Journal of Economics & Management Strategy, 9(4), 513-548
Kenneth E. Train, " Discrete Choice Methods with Simulation", Massachusetts: Cambridge University Press, 2003.