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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