We Know What You Choose! External Validity of Discrete Choice Models

R. Karina Gallardo () and Jaebong Chang ()
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Jaebong Chang: School of Economic Sciences, Washington State University

No 2009-07, Working Papers from School of Economic Sciences, Washington State University

Abstract: For over the last thirty years the multinomial logit model has been the standard in choice modeling. Development in econometrics and computational algorithms has led to the increasing tendency to opt for more flexible models able to depict more realistically choice behavior. This study compares three discrete choice models, the standard multinomial logit, the error components logit, and the random parameters logit. Data were obtained from two choice experiments conducted to investigate consumers’ preferences for fresh pears receiving several postharvest treatments. Model comparisons consisted of in-sample and holdout sample evaluations. Results show that product characteristics hence, datasets, influence model performance. We also found that the multinomial logit model outperformed in at least one of three evaluations in both datasets. Overall, findings signal the need for further studies controlling for context and dataset to have more conclusive cues for discrete choice models capabilities.

Keywords: discrete choice models; validation; holdout sample (search for similar items in EconPapers)
JEL-codes: C25 D12 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2010-04
New Economics Papers: this item is included in nep-dcm and nep-ecm
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