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Inference of preference heterogeneity from choice data

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  • Liang, Annie

Abstract

Suppose an analyst observes inconsistent choices from either a single decision-maker, or a population of agents. Can the analyst determine whether this inconsistency arises from choice error (imperfect maximization of a single preference) or from preference heterogeneity (deliberate maximization of multiple preferences)? I model choice data as generated from imperfect maximization of a small number of preferences. The main results show that (a) simultaneously minimizing the number of inferred preferences and the number of unexplained observations can exactly recover the number of underlying preferences with high probability; (b) simultaneously minimizing the richness of the set of preferences and the number of unexplained observations can exactly recover the choice implications of the decision maker's underlying preferences with high probability.

Suggested Citation

  • Liang, Annie, 2019. "Inference of preference heterogeneity from choice data," Journal of Economic Theory, Elsevier, vol. 179(C), pages 275-311.
    • Handle: RePEc:eee:jetheo:v:179:y:2019:i:c:p:275-311
    DOI: 10.1016/j.jet.2018.09.010
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    2. Khushboo Surana, 2022. "How different are we? Identifying the degree of revealed preference heterogeneity," Discussion Papers 22/09, Department of Economics, University of York.
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    More about this item

    Keywords

    Choice theory; Multiple rationales; Heterogeneity; Revealed preference; Identifiability;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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