The Heterogeneous Aggregate Valence Analysis (HAVAN) Model: A Flexible Approach to Modeling Unobserved Heterogeneity in Discrete Choice Analysis

Author:

Connor R. Forsythe, Cristian Arteaga, John P. Helveston

Keyword:

Economics, Econometrics, Econometrics (econ.EM)

journal:

date:

2024-01-31 00:00:00

Abstract

This paper introduces the Heterogeneous Aggregate Valence Analysis (HAVAN) model, a novel class of discrete choice models. We adopt the term "valence'' to encompass any latent quantity used to model consumer decision-making (e.g., utility, regret, etc.). Diverging from traditional models that parameterize heterogeneous preferences across various product attributes, HAVAN models (pronounced "haven") instead directly characterize alternative-specific heterogeneous preferences. This innovative perspective on consumer heterogeneity affords unprecedented flexibility and significantly reduces simulation burdens commonly associated with mixed logit models. In a simulation experiment, the HAVAN model demonstrates superior predictive performance compared to state-of-the-art artificial neural networks. This finding underscores the potential for HAVAN models to improve discrete choice modeling capabilities.

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