This chapter first explores the reasons for being concerned about the possible presence of heterogeneity in the population, as it relates both to model misspecification issues, the ability to fit data, and the validity of policy inferences generated based on theoretical and empirical analyses. It then considers practical issues regarding the incorporation of heterogeneity in search-based models of the type considered here. The chapter shows that while the presence of observed and unobserved heterogeneity is virtually undisputable in any empirical social science application, how to introduce it into a particular modeling framework is anything but clear. If heterogeneity is added to an empirical specification in a thoughtless manner, estimates and inferences may be no better than those from models that ignore it altogether.
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