Abstract

Individual-specific posterior distributions are an attractive tool for disentangling the tastes for each person in the sample. However, there exists some risks and certain limitations regarding their use. This study reviews and summarizes the theoretical literature about the individual-specific posterior distributions derived from the Mixed Logit model, focusing on their properties, limitations and common pitfalls. It also reviews and analyzes the behavior of some diagnostic checks proposed in the literature for the reliability of such estimates in applied works using Monte Carlo experiments. Finally, this article provides reasonable guidelines for the correct use of individual-specific posterior distributions.