Quantitative Economics

Journal Of The Econometric Society

Edited by: Stéphane Bonhomme • Print ISSN: 1759-7323 • Online ISSN: 1759-7331

Quantitative Economics: Jan, 2024, Volume 15, Issue 1

Moment Inequalities for Multinomial Choice with Fixed Effects

https://doi.org/10.3982/QE1776
p. 1-25

Ariel Pakes, Jack Porter

This paper proposes a new approach to identification of the semiparametric multinomial choice model with fixed effects. The framework employed is the semiparametric version of the traditional multinomial logit with the fixed‐effects model (Chamberlain (1980)). This semiparametric multinomial choice model places no restrictions on either the joint distribution of the random utility disturbances across choices or their within group (or across time) correlations. We show that a novel within‐group comparison leads to a set of conditional moment inequalities. Our main finding shows that the derived conditional moment inequalities yield the sharp identified set for the random utility covariate index, while avoiding the incidental parameter problem. Specializing this result to the binary choice case shows that Manski (1987)'s conditional moment inequalities still lead to sharp bounds without restrictions on covariates.


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Supplemental Material

Supplement to "Moment Inequalities for Multinomial Choice with Fixed Effects"

Ariel Pakes and Jack Porter

This zip file contains the replication files for the manuscript.

Supplement to "Moment Inequalities for Multinomial Choice with Fixed Effects"

Ariel Pakes and Jack Porter

This supplemental appendix contains material not found within the manuscript.