The Impact of Information and its Importance toward the Random Utility Models with Heterogeneous Preference

The first assumption is that all consumers have the same preference about the characteristics of the choices. The second assumption is the independent from irrelevant alternatives assumption. Neither is realistic.

Therefore, this study relaxes these two important assumptions. In other words, this study explores the impacts of the choice set definition toward the parameter and welfare estimates under heterogeneous preference and richer substitutability. The choice set definitions studied include the familiar set, the full set and the distance-based set.

Single variant heterogeneous preference and multivariate heterogeneous preference are both studied. The purpose of this study is to model consumers’ discrete choice behavior more practically.