Simplified probabilistic choice set formation models in a residential location choice context

Alireza Zolfaghari, Aruna Sivakumar and John Polak

Journal of choice modelling, 2013, vol. 9, issue C, 3-13

Abstract: The implementation of a theoretically sound, two-stage discrete-choice modelling paradigm incorporating probabilistic choice sets is impractical when the number of alternatives is large, which is a typical case in most spatial choice contexts. In the context of residential location choice, Kaplan et al. (2009), (2011), (2012) (KBS) developed a semi-compensatory choice model incorporating data of individuals searching for dwellings observed using a customised real estate agency website. This secondary data is used to compute the probability of considering a choice set that takes the form of an ordered probit model. In this paper, we illustrate that the simplicity of the KBS model arises because of an unrealistic assumption that individuals' choice sets only contain alternatives that derive from their observed combination of thresholds. Relaxing this assumption, we introduce a new probabilistic choice set formation model that allows the power set to include all potential choice sets derived from variations in thresholds' combinations. In addition to extending the KBS model, our proposed model asymptotically approaches the classical Manski model, if a suitable structure is used to categorise alternatives. In order to illustrate the biases inherent in the original KBS approach, we compare it with our proposed model and the MNL model using a Monte Carlo experiment. The results of this experiment show that the KBS model causes biases in predicted market share if individuals are free to choose from any potential choice sets derived from combinations of thresholds.

Keywords: Choice set formation; Semi-compensatory models; Ordered probit (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1755534513000614
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eejocm:v:9:y:2013:i:c:p:3-13

DOI: 10.1016/j.jocm.2013.12.004

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
Bibliographic data for series maintained by Catherine Liu ().