Demand Analysis under Latent Choice Constraints

Nikhil Agarwal and Paulo J. Somaini

No 29993, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Consumer choices are constrained in many markets due to either supply-side rationing or information frictions. Examples include matching markets for schools and colleges; entry-level labor markets; limited brand awareness and inattention in consumer markets; and selective admissions to healthcare services. Accounting for these choice constraints is essential for estimating consumer demand. We use a general random utility model for consumer preferences that allows for endogenous characteristics and a reduced-form choice-set formation rule that can be derived from models of the examples described above. The choice-sets can be arbitrarily correlated with preferences. We study non-parametric identification of this model, propose an estimator, and apply these methods to study admissions in the market for kidney dialysis in California. Our results establish identification of the model using two sets of instruments, one that only affects consumer preferences and the other that only affects choice sets. Moreover, these instruments are necessary for identification. We find that dialysis facilities are less likely to admit new patients when they have higher than normal caseload and that patients are more likely to travel further when nearby facilities have high caseloads. Finally, we estimate consumers' preferences and facilities' rationing rules using a Gibbs sampler.

JEL-codes: C50 I11 L0 (search for similar items in EconPapers)
Date: 2022-04
New Economics Papers: this item is included in nep-dcm, nep-des, nep-ecm and nep-upt
Note: IO
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w29993.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:29993

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w29993

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().