Handbook of Choice Modelling
Show Less

Handbook of Choice Modelling

Edited by Stephane Hess and Andrew Daly

Choice modelling is an increasingly important technique for forecasting and valuation, with applications in fields such as transportation, health and environmental economics. For this reason it has attracted attention from leading academics and practitioners and methods have advanced substantially in recent years. This Handbook, composed of contributions from senior figures in the field, summarises the essential analytical techniques and discusses the key current research issues. It will be of interest to academics, students and practitioners in a wide range of areas.
Buy Book in Print
Show Summary Details
You do not have access to this content

Chapter 14: Latent class structures: taste heterogeneity and beyond

Stephane Hess


The treatment of heterogeneity across individual decision makers is one of the key topics of research in choice modelling, as evidenced by many of the chapters in this book. While part of this heterogeneity can in many cases be linked to differences in key socio-demographic characteristics across agents, there has long been a recognition that often a non-trivial share of it cannot be explained in this manner. A number of reasons exist, on the one hand an inability to capture all possible socio-demographic characteristics that may be relevant, and on the other hand the existence of idiosyncratic differences in preferences across decision makers. Limiting ourselves to a purely deterministic treatment of taste heterogeneity can result in a loss of explanatory power, a lack of insights into the true extent of preference heterogeneity, and, depending on the shape and extent of the omitted heterogeneity, potential bias in key model outputs. With the significant increase in performance of personal computers and the availability of easy to use software, a majority of academic studies as well as a large share of applied work now allow for some degree of random preference heterogeneity in their models. The key principle in any model aiming to capture random heterogeneity is to allow for a distribution in sensitivities across decision makers. Two main approaches exist, making use of either a discrete or a continuous distribution.

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information

or login to access all content.