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Development and estimation of a semi-compensatory model with a flexible error structure

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  • Kaplan, Sigal
  • Shiftan, Yoram
  • Bekhor, Shlomo

Abstract

In decisions involving many alternatives, such as residential choice, individuals conduct a two-stage decision process, consisting of eliminating non-viable alternatives and choice from the retained choice set. In light of the potential of semi-compensatory discrete choice models to mathematically represent such decisions, research is inching ahead with the aim of alleviating their high computational complexity and their severe restrictive assumptions. To date, still a major barrier for the implementation of semi-compensatory models is their underlying assumption of independently and identically distributed error terms across alternatives at the choice stage. This study relaxes the assumption by introducing nested substitution patterns and alternatively random taste heterogeneity at the choice stage, thus equating the structural flexibility of semi-compensatory models to their compensatory counterparts. The proposed model is applied to off-campus rental apartment choice by students. Results show the feasibility and importance of introducing a flexible error structure into semi-compensatory models.

Suggested Citation

  • Kaplan, Sigal & Shiftan, Yoram & Bekhor, Shlomo, 2012. "Development and estimation of a semi-compensatory model with a flexible error structure," Transportation Research Part B: Methodological, Elsevier, vol. 46(2), pages 291-304.
  • Handle: RePEc:eee:transb:v:46:y:2012:i:2:p:291-304
    DOI: 10.1016/j.trb.2011.10.004
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Iain Embrey, 2017. "States of Nature and States of Mind: A Generalised Theory of Decision-Making, evaluated by application to Human Capital Development," Working Papers 209919485, Lancaster University Management School, Economics Department.
    2. Zolfaghari, Alireza & Sivakumar, Aruna & Polak, John, 2013. "Simplified probabilistic choice set formation models in a residential location choice context," Journal of choice modelling, Elsevier, vol. 9(C), pages 3-13.
    3. Marisol Castro & Francisco Martínez & Marcela Munizaga, 2013. "Estimation of a constrained multinomial logit model," Transportation, Springer, vol. 40(3), pages 563-581, May.
    4. Campbell, Danny & Hensher, David A. & Scarpa, Riccardo, 2014. "Bounding WTP distributions to reflect the ‘actual’ consideration set," Journal of choice modelling, Elsevier, vol. 11(C), pages 4-15.
    5. Bhat, Chandra R., 2015. "A comprehensive dwelling unit choice model accommodating psychological constructs within a search strategy for consideration set formation," Transportation Research Part B: Methodological, Elsevier, vol. 79(C), pages 161-188.
    6. repec:kap:transp:v:44:y:2017:i:5:d:10.1007_s11116-016-9699-1 is not listed on IDEAS
    7. Caspar G. Chorus, 2014. "Capturing alternative decision rules in travel choice models: a critical discussion," Chapters,in: Handbook of Choice Modelling, chapter 13, pages 290-310 Edward Elgar Publishing.

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