An empirical study of aggregation of alternatives and its influence on prediction: case study of car type choice in Sweden

Shiva Habibi (), Emma Frejinger () and Marcus Sundberg ()
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Shiva Habibi: KTH, Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden
Emma Frejinger: Université de Montréal, Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden, http://en.diro.umontreal.ca/repertoire-departement/vue/frejinger-emma/
Marcus Sundberg: KTH, Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden

No 2015:3, Working papers in Transport Economics from CTS - Centre for Transport Studies Stockholm (KTH and VTI)

Abstract: In the car type choice models, alternatives are usually grouped into categories by some of their main characteristics such as make, model, vintage, body type and/or fuel type. Each of these categories contains different versions of the cars that are usually not recognized in the applied literature. In this study we empirically investigate whether including the heterogeneity of these versions in the modeling do matter in estimation and prediction or not. We have detailed data on alternatives available on the market down to the versions level of each model which enables us to account for heterogeneity in the model. We also have Swedish car registry data as demand. We estimate different discrete choice models with different methods of correction for alternative aggregation including nesting structure. We estimate these models on based on year 2006 Swedish registry data for new cars, predict for 2007 and compare the results. The results show that including heterogeneity of cars' versions in the model improves model fitness but it does not necessarily improve prediction results.

Keywords: Aggregate alternatives; Prediction; Car type choice; Discrete choice modeling; Clean vehicles (search for similar items in EconPapers)
JEL-codes: R40 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2015-02-10
New Economics Papers: this item is included in nep-dcm, nep-ene and nep-tre
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:ctswps:2015_003

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