Hamiltonian sequential Monte Carlo with application to consumer choice behavior. (2nd January 2023)

• Record Type: Journal Article
• Authors: Burda, Martin; Daviet, Remi
• Is Part Of: Econometric reviews. Volume 42:Number 1(2023)
• Page Start: 54
• Page End: 77
• Publication Date: 2023-01-02
• Subjects: Bayesian nonparametrics -- discrete choice -- mixed panel logit -- particle filtering; C11 -- C14 -- C15 -- C23 -- C25; Econometrics -- Periodicals; 330.015195
• DOI: 10.1080/07474938.2022.2140982
• Languages: English
• ISSNs: 0747-4938

Abstract

Abstract: The practical use of nonparametric Bayesian methods requires the availability of efficient algorithms for posterior inference. The inherently serial nature of traditional Markov chain Monte Carlo (MCMC) methods imposes limitations on their efficiency and scalability. In recent years, there has been a surge of research activity devoted to developing alternative implementation methods that target parallel computing environments. Sequential Monte Carlo (SMC), also known as a particle filter, has been gaining popularity due to its desirable properties. SMC uses a genetic mutation-selection sampling approach with a set of particles representing the posterior distribution of a stochastic process. We propose to enhance the performance of SMC by utilizing Hamiltonian transition dynamics in the particle transition phase, in place of random walk used in the previous literature. We call the resulting procedure Hamiltonian Sequential Monte Carlo (HSMC). Hamiltonian transition dynamics have been shown to yield superior mixing and convergence properties relative to random walk transition dynamics in the context of MCMC procedures. The rationale behind HSMC is to translate such gains to the SMC environment. HSMC will facilitate practical estimation of models with complicated latent structures, such as nonparametric individual unobserved heterogeneity, that are otherwise difficult to implement. We demonstrate the behavior of HSMC in a challenging simulation study and contrast its favorable performance with SMC and other alternative approaches. We then apply HSMC to a panel discrete choice model with nonparametric consumer heterogeneity, allowing for multiple modes, asymmetries, and data-driven clustering, providing insights for consumer segmentation, individual level marketing, and price micromanagement.