Discrete Choice under Risk with Limited Consideration

Understand

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.