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On the equivalence of location choice models: Conditional logit, nested logit and Poisson

  • Schmidheiny, Kurt
  • Brülhart, Marius

It is well understood that the two most popular empirical models of location choice - conditional logit and Poisson - return identical coefficient estimates when the regressors are not individual specific. We show that these two models differ starkly in terms of their implied predictions. The conditional logit model represents a zero-sum world, in which one region's gain is the other regions' loss. In contrast, the Poisson model implies a positive-sum economy, in which one region's gain is no other region's loss. We also show that all intermediate cases can be represented as a nested logit model with a single outside option. The nested logit turns out to be a linear combination of the conditional logit and Poisson models. Conditional logit and Poisson elasticities mark the polar cases and can therefore serve as boundary values in applied research.

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Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 69 (2011)
Issue (Month): 2 (March)
Pages: 214-222

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Handle: RePEc:eee:juecon:v:69:y:2011:i:2:p:214-222
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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