Fernandez-Antolin, A., Guevara-Cue, A., de Lapparent, M., and Bierlaire, M. (2016)

Correcting for endogeneity using the multiple indicator solution

In this paper we extend the Multiple Indicator Solution (MIS),used to correct for endogeneity, so that it can also be used when there are interactions between observed and unobserved factors in the specification of the utility function. We show the theoretical derivation and illustrate it with a case study. Policy indicators, such as time elasticity and value of time are derived, and the results are compared with a logit model and with an Integrated Choice and Latent Variable (ICLV) model. The contribution is twofold: this is the first application of the MIS methodology with revealed preference data, and the MIS has been adapted to account for interactions between observed and unobserved attributes.