This paper is concerned with learning decision makers' (DMs) preferences using data on observed choices from a finite set of risky alternatives with monetary outcomes . We propose a discrete choice model with unobserved heterogeneity in consideration sets (the collection of alternatives considered by DMs) and unobserved heterogeneity in standard risk aversion. In this framework, stochastic choice is driven both by different rankings of alternatives induced by unobserved heterogeneity in risk preferences and by different sets of alternatives considered. We obtain sufficient conditions for  semi-nonparametric point identification of both the distribution of unobserved heterogeneity in preferences and the distribution of consideration sets . Our method yields an estimator that is easy to compute and that can be used in markets with a large number of alternatives. We apply our method to a dataset on property insurance purchases . We find that although households are on average strongly risk averse, they consider lower coverages more frequently than higher coverages. Finally, we estimate the monetary losses associated with limited consideration in our application .
This paper is concerned with learning decision makers' preferences using data on observed choices from a finite set of risky alternatives . We propose a discrete choice model with unobserved heterogeneity in consideration sets and in standard risk aversion. We obtain sufficient conditions for the model's semi-nonparametric point identification , including in cases where consideration depends on preferences and on some of the exogenous variables . Our method yields an estimator that is easy to compute and is applicable in markets with large choice sets. We illustrate its properties using a dataset on property insurance purchases .
D
(DMs)
D
with monetary outcomes
R
(the collection of alternatives considered by DMs) and unobserved heterogeneity
and
D
In this framework, stochastic choice is driven both by different rankings of alternatives induced by unobserved heterogeneity in risk preferences and by different sets of alternatives considered.
A
the model's
R
of both the distribution of unobserved heterogeneity in preferences and the distribution of consideration sets
, including in cases where consideration depends on preferences and on some of the exogenous variables
R
that can be used
is applicable
R
a large number of alternatives. We apply our method to
large choice sets. We illustrate its properties using
D
. We find that although households are on average strongly risk averse, they consider lower coverages more frequently than higher coverages. Finally, we estimate the monetary losses associated with limited consideration in our application