Relation Between EBA and Nested Logit Models

Rajeev Kohli () and Kamel Jedidi ()
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Rajeev Kohli: Graduate School of Business, Columbia University, New York, New York 10027
Kamel Jedidi: Graduate School of Business, Columbia University, New York, New York 10027

Operations Research, 2017, vol. 65, issue 3, 621-634

Abstract: We show that elimination by aspects (EBA) generalizes nested logit and cross-nested logit models. The latter two models are equivalent to a special case of EBA called preference trees. The transformations between preference trees and nested logit models become more complex when the utilities of alternatives are functions of covariates. In this case, a simple model in one domain corresponds to a complex model in the other. An extended EBA model, in which the utilities of alternatives are functions of covariates, represents a two-stage choice process. Alternatives are first screened using a probabilistic lexicographic rule and then compared in terms of their compensatory utilities. We provide a typology of the relations between EBA and other logit models, and we discuss issues concerning estimation, statistical testing, and data collection. We describe an application illustrating (1) the process of constructing a preference tree with covariates and (2) the different implications obtained from a preference tree and a comparable nested logit model.

Keywords: elimination by aspects; preference trees; hierarchical elimination model; nested logit model; cross-nested logit model; two-stage choice model; order independence; independence of irrelevant alternatives (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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