The Trace Restriction: An Alternative Identification Strategy for the Bayesian Multinomial Probit Model

Lane F. Burgette and Erik V. Nordheim

Journal of Business & Economic Statistics, 2012, vol. 30, issue 3, 404-410

Abstract: Previous authors have made Bayesian multinomial probit models identifiable by fixing a parameter on the main diagonal of the covariance matrix. The choice of which element one fixes can influence posterior predictions. Thus, we propose restricting the trace of the covariance matrix, which we achieve without computational penalty. This permits a prior that is symmetric to permutations of the nonbase outcome categories. We find in real and simulated consumer choice datasets that the trace-restricted model is less prone to making extreme predictions. Further, the trace restriction can provide stronger identification, yielding marginal posterior distributions that are more easily interpreted.

Date: 2012
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DOI: 10.1080/07350015.2012.680416

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