A note on the use of aggregate data in individual choice models: Discrete consumer choice among alternative fuels for residential appliances

In order to exploit the usefulness of qualitative models of individual choice and the availability of aggregate energy demand data, this paper develops a maximum likelihood technique for incorporating aggregate data into individual choice models. The paper treats the use of aggregate data as a measurement error problem; it develops consistent estimators of individual taste by correcting for the implied measurement error. Using the maximum likelihood technique, a number of individual choice models are estimated for residential demand for space heaters, water heaters, ranges and clothes dryers. The extent of asymptotic bias generated by the uncorrected use of aggregate data is documented.