 Variance-component-based nested logit specifications: Improved formulation, and practical microsimulation of random disturbance termsDavid S. Bunch and David M. Rocke Journal of choice modelling, 2016, vol. 21, issue C, 30-35 Abstract: The initial motivation leading to the results in this paper was a problem most choice modeling researchers may have not considered: how to simulate random disturbance terms from nested logit (NL) models. We develop an approach using results from Cardell (1997), who proved the existence of a probability distribution (C(λ)) that could be used to formulate NL models based on statistically independent variance components. These components can be interpreted as unobserved preference heterogeneity for the choice ‘dimensions’ used to define NL tree structures. Simulation aside, we consider this formulation to have other practical advantages for empirical work, but it does not appear to have penetrated the literature (possibly due to notational obstacles). We use notation from Daly (2001) to implement an equivalent representation, which also establishes mathematical equivalence between Cardell (1997) and other important results in the NL literature. Keywords: Discrete choice modeling; Nested logit; Random utility maximization; Monte Carlo simulation; Random disturbance terms (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eejocm:v:21:y:2016:i:c:p:30-35 DOI: 10.1016/j.jocm.2016.04.001 Access Statistics for this article Journal of choice modelling is currently edited by S. Hess and J.M. Rose More articles in Journal of choice modelling from Elsevier |
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