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How, when and why integrated choice and latent variable models are latently useful

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  • Vij, Akshay
  • Walker, Joan L.

Abstract

Integrated Choice and Latent Variable (ICLV) models are an increasingly popular extension to discrete choice models that attempt explicitly to model the cognitive process underlying the formation of any choice. This study was born from the discovery that an ICLV model can in many cases be reduced to a choice model without latent variables that fits the choice data at least as well as the original ICLV model from which it was obtained. The failure of past studies to recognize this fact raised concerns about other benefits that have been claimed with regards to the framework. With the objective of addressing these concerns, this study undertakes a systematic comparison between the ICLV model and an appropriately specified reduced form choice model. We derive analytical proofs regarding the benefits of the framework and use synthetic datasets to corroborate any conclusions drawn from the analytical proofs. We find that the ICLV model can under certain conditions lead to an improvement in the analyst's ability to predict outcomes to the choice data, allow for the identification of structural relationships between observable and latent variables, correct for bias arising from omitted variables and measurement error, reduce the variance of parameter estimates, and abet practice and policy, all in ways that would not be possible using the reduced form choice model. We synthesize these findings into a general process of evaluation that can be used to assess what gains, if any, might be had from developing an ICLV model in a particular empirical context.

Suggested Citation

  • Vij, Akshay & Walker, Joan L., 2016. "How, when and why integrated choice and latent variable models are latently useful," Transportation Research Part B: Methodological, Elsevier, vol. 90(C), pages 192-217.
  • Handle: RePEc:eee:transb:v:90:y:2016:i:c:p:192-217
    DOI: 10.1016/j.trb.2016.04.021
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:eejocm:v:29:y:2018:i:c:p:152-168 is not listed on IDEAS
    2. Wiktor Budziński & Mikołaj Czajkowski, 2018. "Hybrid choice models vs. endogeneity of indicator variables: a Monte Carlo investigation," Working Papers 2018-21, Faculty of Economic Sciences, University of Warsaw.
    3. repec:eee:transb:v:101:y:2017:i:c:p:72-88 is not listed on IDEAS
    4. repec:eee:jaitra:v:69:y:2018:i:c:p:99-111 is not listed on IDEAS
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    7. repec:eee:transb:v:117:y:2018:i:pa:p:318-341 is not listed on IDEAS
    8. Joanna Mazur & Katarzyna Śledziewska & Damian Zieba, 2018. "Regulation of Geo-blocking: does it address the problem of low intraEU iTrade?," Working Papers 2018-20, Faculty of Economic Sciences, University of Warsaw.
    9. repec:eee:transa:v:111:y:2018:i:c:p:252-265 is not listed on IDEAS
    10. repec:eee:transb:v:117:y:2018:i:pa:p:520-541 is not listed on IDEAS
    11. repec:eee:eejocm:v:26:y:2018:i:c:p:80-100 is not listed on IDEAS
    12. Bouscasse, H., 2018. "Integrated choice and latent variable models: A literature review on mode choice," Working Papers 2018-07, Grenoble Applied Economics Laboratory (GAEL).
    13. Mokhtarian, Patricia L., 2016. "Presenting the Independence of Irrelevant Alternatives property in a first course on logit modeling," Journal of choice modelling, Elsevier, vol. 21(C), pages 25-29.
    14. repec:kap:transp:v:45:y:2018:i:6:d:10.1007_s11116-018-9869-4 is not listed on IDEAS
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    16. Czajkowski, Mikołaj & Vossler, Christian A. & Budziński, Wiktor & Wiśniewska, Aleksandra & Zawojska, Ewa, 2017. "Addressing empirical challenges related to the incentive compatibility of stated preferences methods," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 47-63.
    17. Varela, Juan Manuel Lorenzo & Börjesson, Maria & Daly, Andrew, 2018. "Quantifying errors in travel time and cost by latent variables," Working papers in Transport Economics 2018:3, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    18. repec:eee:jotrge:v:62:y:2017:i:c:p:236-246 is not listed on IDEAS
    19. Hélène Bouscasse, 2018. "Integrated choice and latent variable models: A literature review on mode choice," Working Papers hal-01795630, HAL.
    20. repec:eee:trapol:v:71:y:2018:i:c:p:138-146 is not listed on IDEAS
    21. Anna Bartczak & Wiktor Budziński & Bernadeta Gołębiowska, 2018. "Impact of beliefs about negative effects of wind turbines on preference heterogeneity regarding renewable energy development in Poland," Working Papers 2018-19, Faculty of Economic Sciences, University of Warsaw.
    22. repec:eee:transa:v:116:y:2018:i:c:p:547-567 is not listed on IDEAS
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