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Mixed MNL models for discrete response
Author(s) -
McFadden Daniel,
Train Kenneth
Publication year - 2000
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/1099-1255(200009/10)15:5<447::aid-jae570>3.0.co;2-1
Subject(s) - discrete choice , mixed logit , mixing (physics) , multinomial logistic regression , parametric statistics , computer science , logit , econometrics , multinomial distribution , maximization , utility maximization , mathematical optimization , variable (mathematics) , estimation , mathematics , logistic regression , statistics , mathematical economics , economics , mathematical analysis , physics , management , quantum mechanics
This paper considers mixed, or random coefficients, multinomial logit (MMNL) models for discrete response, and establishes the following results. Under mild regularity conditions, any discrete choice model derived from random utility maximization has choice probabilities that can be approximated as closely as one pleases by a MMNL model. Practical estimation of a parametric mixing family can be carried out by Maximum Simulated Likelihood Estimation or Method of Simulated Moments, and easily computed instruments are provided that make the latter procedure fairly efficient. The adequacy of a mixing specification can be tested simply as an omitted variable test with appropriately defined artificial variables. An application to a problem of demand for alternative vehicles shows that MMNL provides a flexible and computationally practical approach to discrete response analysis. Copyright © 2000 John Wiley & Sons, Ltd.