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A Logit Model With Endogenous Explanatory Variables and Network Externalities

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  • Louis Grange
  • Felipe González
  • Ignacio Vargas
  • Rodrigo Troncoso

Abstract

A novel logit model is presented that explicitly includes endogeneity in explanatory variables whose values depend on individual choice decisions that involve network externalities or social interactions such as those impacting road congestion or public transport comfort and convenience. The proposed specification corrects for this particular type of endogeneity. The model is derived from a linearly constrained maximum entropy optimization problem that incorporates the network externalities or social interactions causing the endogeneity. It is validated through simulations and an application to a case of transport mode choice in a Chilean city using real data. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Louis Grange & Felipe González & Ignacio Vargas & Rodrigo Troncoso, 2015. "A Logit Model With Endogenous Explanatory Variables and Network Externalities," Networks and Spatial Economics, Springer, vol. 15(1), pages 89-116, March.
    • Handle: RePEc:kap:netspa:v:15:y:2015:i:1:p:89-116
    DOI: 10.1007/s11067-014-9271-5
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    Cited by:

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    2. 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.
    3. José Luis Espinosa-Aranda & Ricardo García-Ródenas & María Luz López-García & Eusebio Angulo, 2018. "Constrained nested logit model: formulation and estimation," Transportation, Springer, vol. 45(5), pages 1523-1557, September.
    4. Stefano Mainardi, 2021. "Preference heterogeneity, neighbourhood effects and basic services: logit kernel models for farmers’ climate adaptation in Ethiopia," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(5), pages 6869-6912, May.
    5. Wang, Yu & Wang, Yacan & Ettema, Dick & Mao, Zidan & Charlton, Samuel G. & Zhou, Huiyu, 2020. "Commuter value perceptions in peak avoidance behavior: An empirical study in the Beijing subway system," Transportation Research Part A: Policy and Practice, Elsevier, vol. 139(C), pages 70-84.

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    More about this item

    Keywords

    Logit model; Endogeneity; Bias; Network externalities; Social interactions; Fixed point; Maximum entropy; C13; C5; C6; R4;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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