Estimation of Store Choice Model with Endogenous Shopping Bundles

This paper examines the eects of measurement errors in household shopping plans and  price beliefs on the estimates of price elasticities in retail outlet choice. Previous studies parsimoniously use realized purchases as a proxy for unobserved shopping lists and assume homogenous price expectation across all households and over the entire sample period. This measurement error in forecasting expected basket costs introduces attenuation bias in store-level price elasticities toward zero. I show that the bias is reduced with my improved measures of expected basket costs by estimating shopping lists of households and by constructing household-, time-, store-, and goods-specic price expectations.