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Mixed MNL models for discrete response

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Author Info
Daniel McFadden (Department of Economics, University of California, Berkeley, CA, 94720-3880, USA)
Kenneth Train (Department of Economics, University of California, Berkeley, CA, 94720-3880, USA)

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Abstract

This paper considers mixed, or random coefficients, multinomial logit (MMNL) models for discrete response, and establishes the following results. Under mild regularity conditions, any discrete choice model derived from random utility maximization has choice probabilities that can be approximated as closely as one pleases by a MMNL model. Practical estimation of a parametric mixing family can be carried out by Maximum Simulated Likelihood Estimation or Method of Simulated Moments, and easily computed instruments are provided that make the latter procedure fairly efficient. The adequacy of a mixing specification can be tested simply as an omitted variable test with appropriately defined artificial variables. An application to a problem of demand for alternative vehicles shows that MMNL provides a flexible and computationally practical approach to discrete response analysis. Copyright © 2000 John Wiley & Sons, Ltd.

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File URL: http://qed.econ.queensu.ca:80/jae/2000-v15.5/
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 15 (2000)
Issue (Month): 5 ()
Pages: 447-470
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Handle: RePEc:jae:japmet:v:15:y:2000:i:5:p:447-470

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Kenneth Train, 2000. "Halton Sequences for Mixed Logit," Department of Economics, Working Paper Series 1035, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
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  2. McFadden, Daniel, 1989. "A Method of Simulated Moments for Estimation of Discrete Response Models without Numerical Integration," Econometrica, Econometric Society, vol. 57(5), pages 995-1026, September. [Downloadable!] (restricted)
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  3. David Revelt & Kenneth Train, 1998. "Mixed Logit With Repeated Choices: Households' Choices Of Appliance Efficiency Level," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 647-657, November. [Downloadable!] (restricted)
  4. Kenneth Train, . "Simulation Methods for Probit and Related Models Based on Convenient Error Partitioning," Working Papers _009, University of California at Berkeley, Econometrics Laboratory Software Archive. [Downloadable!]
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  5. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March. [Downloadable!] (restricted)
  6. Beggs, John J., 1988. "A simple model for heterogeneity in binary logit models," Economics Letters, Elsevier, vol. 27(3), pages 245-249. [Downloadable!] (restricted)
  7. Train, Kenneth E & McFadden, Daniel L & Goett, Andrew A, 1987. "Consumer Attitudes and Voluntary Rate Schedules for Public Utilities," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 383-91, August. [Downloadable!] (restricted)
  8. Westin, Richard B. & Gillen, David W., 1978. "Parking location and transit demand : A case study of endogenous attributes in disaggregate mode choice models," Journal of Econometrics, Elsevier, vol. 8(1), pages 75-101, August. [Downloadable!] (restricted)
  9. Steckel, Joel H & Vanhonacker, Wilfried R, 1988. "A Heterogeneous Conditional Logit Model of Choice," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(3), pages 391-98, July.
  10. Chavas, Jean-Paul & Segerson, Kathleen, 1986. "Singularity and Auotregressive Disturbances in Linear Logit Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(2), pages 161-69, April.
  11. Dagsvik, John K, 1994. "Discrete and Continuous Choice, Max-Stable Processes, and Independence from Irrelevant Attributes," Econometrica, Econometric Society, vol. 62(5), pages 1179-1205, September. [Downloadable!] (restricted)
  12. Lee, Lung-Fei & Chesher, Andrew, 1986. "Specification testing when score test statistics are identically zero," Journal of Econometrics, Elsevier, vol. 31(2), pages 121-149, March. [Downloadable!] (restricted)
  13. McFadden, Daniel & Ruud, Paul A, 1994. "Estimation by Simulation," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 591-608, November. [Downloadable!] (restricted)
  14. McFadden, Daniel, 1987. "Regression-based specification tests for the multinomial logit model," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 63-82. [Downloadable!] (restricted)
  15. Jain, Dipak C & Vilcassim, Naufel J & Chintagunta, Pradeep K, 1994. "A Random-Coefficients Logit Brand-Choice Model Applied to Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 317-28, July.
  16. Chesher, Andrew & Santos Silva, J M C, 2002. "Taste Variation in Discrete Choice Models," Review of Economic Studies, Blackwell Publishing, vol. 69(1), pages 147-68, January.
  17. Brownstone, David & Train, Kenneth, 1998. "Forecasting new product penetration with flexible substitution patterns," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 109-129, November. [Downloadable!] (restricted)
  18. Westin, Richard B., 1974. "Predictions from binary choice models," Journal of Econometrics, Elsevier, vol. 2(1), pages 1-16, May. [Downloadable!] (restricted)
  19. Stern, Steven, 1994. "Two Dynamic Discrete Choice Estimation Problems and Simulation Method Solutions," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 695-702, November. [Downloadable!] (restricted)
  20. Enberg, John & Gottschalk, Peter & Wolf, Douglas, 1990. "A random-effects logit model of work-welfare transitions," Journal of Econometrics, Elsevier, vol. 43(1-2), pages 63-75. [Downloadable!] (restricted)
  21. James J. Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explorations with a Dynamic General Equilibrium Model of Labor Earnings with Heterogeneous Agents," NBER Working Papers 6384, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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