Choice Model Simulation - Defining Choice Set

Defining Choice Set

When a researcher has some consumer choice data in his/her hand and tries to construct a choice model and simulate it against the data, he/she needs to first define a choice set. A Choice Set in discrete choice models is defined to be finite, exhaustive, and mutually exclusive. For instance, consider households' choice of how many laptops to own. The researcher can define the choice set depending on the nature of the data and the interpretation they wish to draw, as long as it satisfies three properties mentioned above. Some examples of choice sets that meet the categories are the following:

  1. 0, 1, More than 1 laptop
  2. 0, 1, 2, More than 2 laptops
  3. Less than 2, 2, 3, 4, More than 4 laptops

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