Homework 5 Consumer heterogeneity

(To be completed individually*, soft copy submission due August 3,

2015 in u-cursos)
I. Latent class modeling
1.

Simulate data with the following characteristics:

a. 2500 subjects
b. 20 choice occasions
c. 10 attributes (Normally (0,1) distributed)
d. two segments (30 vs 70%)
e. 3 alternatives plus no choice (4 in total)
f. Multinomial logit choice
g. Beta parameters [-b/5 -b/4 -b/3 -b/2 b b b/2 b/3 b/4 b/5]
choose different values for b for each segment.

2.

Estimate a Latent class model

a. Estimate models with 1, 2 or 3 latent classes and show that
the chosen model is the one with 2 segments. Use different
criteria (penalized likelihood, hit rate, etc.).
b. What are the a-priori membership probabilities? What are
the a-posteriori membership probabilities?
c. Show that you can recover consumers membership (e.g.,
using a hit rate matrix, scatter plot).

II. Bayesian modeling

Using the data simulated in I.
1.
2.

Estimate a mixed logit model (use uninformative priors) using

MCMC
Compare the estimates of the mixed logit with the parameter
estimates of the chosen model in I.2

Please submit a written report of your work. You must also submit the
data and the code used to generate the data and estimate the models.
*Undergrad and MGO students may work in groups of 2. PhD
students must submit individual reports.