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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)

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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Bibliographic 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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References

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  1. 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.
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  3. 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.
  4. Vassilis A. Hajivassiliou & Daniel L. McFadden, 1993. "The Method of Simulated Scores for the Estimation of LDV Models," Working Papers _023, Yale University.
  5. Kenneth E. Train, 1996. "Simulation Methods for Probit and Related Models Based on Convenient Error Partitioning," Econometrics 9605001, EconWPA.
  6. Brownstone, David & Bunch, David S. & Golob, Thomas F. & Ren, Weiping, 1996. "A Transaction Choice Model for Forecasting Demand for Alternative-Fuel Vehicles," University of California Transportation Center, Working Papers qt0244r8g2, University of California Transportation Center.
  7. 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.
  8. 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.
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  10. Kenneth E. Train, 1998. "Recreation Demand Models with Taste Differences over People," Land Economics, University of Wisconsin Press, vol. 74(2), pages 230-239.
  11. Brownstone, David & Train, Kenneth, 1999. "Forecasting new product penetration with flexible substitution patterns," University of California Transportation Center, Working Papers qt1j6814b3, University of California Transportation Center.
  12. V.A. Hajivassiliou & P. A. Ruud, 1993. "Classical Estimation Methods for LDV Models Using Simulation," Econometrics 9311002, EconWPA.
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  14. McFadden, Daniel, 1987. "Regression-based specification tests for the multinomial logit model," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 63-82.
  15. Brownstone, David & Bunch, David S & Golob, Thomas F & Ren, Weiping, 1996. "A Transactions Choice Model for Forecasting Demand for Alternative-Fuel Vehicles," University of California Transportation Center, Working Papers qt3sm7w9zk, University of California Transportation Center.
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  17. McFadden, Daniel & Ruud, Paul A, 1994. "Estimation by Simulation," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 591-608, November.
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  19. Steven Stern, 1994. "Two Dynamic Discrete Choice Estimation Problems and Simulation Method Solutions," Virginia Economics Online Papers 389, University of Virginia, Department of Economics.
  20. 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.
  21. 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.
  22. 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.
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