SPECIFICATION AND ESTIMATION OF THE NESTED LOGIT MODEL: ALTERNATIVE NORMALISATIONS

The nested logit model (NLM) is currently the preferred extension to the simple multinomial logit discrete choice model. The appeal of the NLM is its ability to accommodate differential degrees of interdependence between subsets of alternatives in a choice set. The existing literature displays a frequent lack of attention to the very precise form that an NLM must take to ensure that the resulting model is invariant to normalization of scale and is consistent with utility maximization. Some recent papers have addressed aspects of this issue, but some important points remain somewhat ambiguous. When utility function parameters have different implicit scales, imposing equality restrictions on common attributes associated with different alternatives can distort these differences in scale. Model scale parameters are then 'forced' to take up the real differences that should be handled by the utility function parameter. With many variations in model specification appearing in the literature, comparisons become difficult, if not impossible, without clear statements of the precise form of the NLM. There are a number of approaches to achieving this, with some or all of them available as options in commercially available software packages. This article seeks to clarify the issue, and to establish the points of similarity and dissimilarity of the different formulations in the literature.

Availability:
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Corporate Authors:
Elsevier

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Kidlington, Oxford United Kingdom OX5 1GB
Authors:
- Hensher, D A
- Greene, W H
Publication Date: 2002-1

Language

English

Media Info

Features: Figures; References; Tables;
Pagination: p. 1-17
Serial:
- Transportation Research Part B: Methodological
- Volume: 36
- Issue Number: 1
- Publisher: Elsevier
- ISSN: 0191-2615
- Serial URL: http://www.sciencedirect.com/science/journal/01912615

Subject/Index Terms

TRT Terms: Choice models; Discrete systems; Forecasting; Logits; Multinomials; Transportation planning; Travel behavior
Uncontrolled Terms: Discrete choice model; Nested logit models
Subject Areas: Highways; Planning and Forecasting; I72: Traffic and Transport Planning;

Filing Info

Accession Number: 00819444
Record Type: Publication
Files: TRIS, ATRI
Created Date: Nov 9 2001 12:00AM