AbstractThe logsum formula, which provides the expected maximum utility for the multinomial logit model, is often used as a measure of welfare. We provide here a closed form formula of the welfare measure of an individual who has not access to his first-best choice, but has access to his rth-best choice, r = 2, ...n, where n is the number of alternatives. The derivation is based on a standard identity in order statistics.
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Date of creation: 23 Apr 2012
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Discrete choice models; Gumbel distribution; Logit; Logsum; Order statistics;
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- de Palma, Andre & Kilani, Karim, 2007.
"Invariance of conditional maximum utility,"
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- de Jong, Gerard & Daly, Andrew & Pieters, Marits & van der Hoorn, Toon, 2007. "The logsum as an evaluation measure: Review of the literature and new results," Transportation Research Part A: Policy and Practice, Elsevier, vol. 41(9), pages 874-889, November.
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THEMA Working Papers
2007-04, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- de Palma, Andre & Picard, Nathalie & Waddell, Paul, 2007. "Discrete choice models with capacity constraints: An empirical analysis of the housing market of the greater Paris region," Journal of Urban Economics, Elsevier, vol. 62(2), pages 204-230, September.
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