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Tests for the consistency of three-level nested logit models with utility maximization


  • María José Gil-Moltó

    (University of St Andrews)

  • Arne Risa Hole

    (University of St Andrews)


This paper provides necessary conditions for testing the local consistency of three-level nested logit models with random utility maximization. We find that for a model with two sub-nests per nest the conditions can lead to a substantial increase in the range of acceptable dissimilarity parameters, irrespective of the number of alternatives per sub-nest.

Suggested Citation

  • María José Gil-Moltó & Arne Risa Hole, 2003. "Tests for the consistency of three-level nested logit models with utility maximization," Econometrics 0312001, EconWPA, revised 08 Jan 2004.
  • Handle: RePEc:wpa:wuwpem:0312001
    Note: Type of Document - ; prepared on WinXP; to print on LaserJet IIIp; pages: 13

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    References listed on IDEAS

    1. Herriges, Joseph A. & Kling, Catherine L., 1996. "Testing the consistency of nested logit models with utility maximization," Economics Letters, Elsevier, vol. 50(1), pages 33-39, January.
    2. Borsch-Supan, Axel, 1990. "On the compatibility of nested logit models with utility maximization," Journal of Econometrics, Elsevier, vol. 43(3), pages 373-388, March.
    3. Kao-Lee Liaw & William Frey, 2003. "Location of adult children as an attraction for black and white elderly return and onward migrants in the United States: Application of a three-level nested logit model with census data," Mathematical Population Studies, Taylor & Francis Journals, vol. 10(2), pages 75-98.
    4. Daniel McFadden, 1977. "Modelling the Choice of Residential Location," Cowles Foundation Discussion Papers 477, Cowles Foundation for Research in Economics, Yale University.
    5. Kling, Catherine L. & Herriges, Joseph A., 1995. "Empirical Investigation of the Consistency of Nested Logit Models with Utility Maximization (An)," Staff General Research Papers Archive 1499, Iowa State University, Department of Economics.
    6. Eymann, Angelika & Ronning, Gerd, 1997. "Microeconometric models of tourists' destination choice," Regional Science and Urban Economics, Elsevier, vol. 27(6), pages 735-761, November.
    7. Lahiri, Kajal & Gao, Jian, 2002. "Bayesian analysis of nested logit model by Markov chain Monte Carlo," Journal of Econometrics, Elsevier, vol. 111(1), pages 103-133, November.
    8. Daniel McFadden, 1977. "Quantitative Methods for Analyzing Travel Behaviour of Individuals: Some Recent Developments," Cowles Foundation Discussion Papers 474, Cowles Foundation for Research in Economics, Yale University.
    9. W. Shaw & Michael Ozog, 1999. "Modeling Overnight Recreation Trip Choice: Application of a Repeated Nested Multinomial Logit Model," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 13(4), pages 397-414, June.
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    Cited by:

    1. Ma, Chunbo & Burton, Michael P., 2013. "A Nested Logit Model of Green Electricity Consumption in Western Australia," Working Papers 148411, University of Western Australia, School of Agricultural and Resource Economics.
    2. Melo, Emerson, 2012. "A representative consumer theorem for discrete choice models in networked markets," Economics Letters, Elsevier, vol. 117(3), pages 862-865.

    More about this item


    Nested logit; Discrete choice; Random utility maximization;

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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