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Yogurts Choose Consumers? Estimation of Random-Utility Models via Two-Sided Matching

Author

Listed:
  • Odran Bonnet
  • Alfred Galichon
  • Yu-Wei Hsieh
  • Keith O’Hara
  • Matt Shum
Abstract
The problem of demand inversion—a crucial step in the estimation of random utility discrete-choice models—is equivalent to the determination of stable outcomes in two-sided matching models. This equivalence applies to random utility models that are not necessarily additive, smooth, nor even invertible. Based on this equivalence, algorithms for the determination of stable matchings provide effective computational methods for estimating these models. For non-invertible models, the identified set of utility vectors is a lattice, and the matching algorithms recover sharp upper and lower bounds on the utilities. Our matching approach facilitates estimation of models that were previously difficult to estimate, such as the pure characteristics model. An empirical application to voting data from the 1999 European Parliament elections illustrates the good performance of our matching-based demand inversion algorithms in practice.

Suggested Citation

  • Odran Bonnet & Alfred Galichon & Yu-Wei Hsieh & Keith O’Hara & Matt Shum, 2022. "Yogurts Choose Consumers? Estimation of Random-Utility Models via Two-Sided Matching," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(6), pages 3085-3114.
    • Handle: RePEc:oup:restud:v:89:y:2022:i:6:p:3085-3114.
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    File URL: http://hdl.handle.net/10.1093/restud/rdac006
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    2. Liang Chen & Eugene Choo & Alfred Galichon & Simon Weber, 2023. "Existence of a Competitive Equilibrium with Substitutes, with Applications to Matching and Discrete Choice Models," Papers 2309.11416, arXiv.org.
    3. Zhaonan Qu & Alfred Galichon & Johan Ugander, 2023. "On Sinkhorn's Algorithm and Choice Modeling," Papers 2310.00260, arXiv.org.
    4. Takeshi Fukasawa, 2024. "Fast and simple inner-loop algorithms of static / dynamic BLP estimations," Papers 2404.04494, arXiv.org, revised Oct 2024.
    5. Allen, Roy, 2022. "Injectivity and the law of demand," Economics Letters, Elsevier, vol. 215(C).
    6. Alfred Galichon, 2021. "The Unreasonable Effectiveness of Optimal Transport in Economics," Working Papers hal-03936221, HAL.
    7. Alfred Galichon, 2021. "The unreasonable effectiveness of optimal transport in economics," Papers 2107.04700, arXiv.org.
    8. Alfred Galichon & Yu-Wei Hsieh & Maxime Sylvestre, 2023. "Monotone comparative statics for submodular functions, with an application to aggregated deferred acceptance," Papers 2304.12171, arXiv.org, revised Aug 2024.
    9. Yao (Alex) Yao & Sha Yang & K. Sudhir, 2021. "Two-Sided Matching Between Fashion Firms and Publishers: When Firms Strategically Target Consumers for Brand Image," Working Papers 21-07, NET Institute.

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