Estimation with the nested logit model: specifications and software particularities

Arbeitspapier

The paper discusses the nested logit model for choices between a set of mutually exclusive alternatives (e.g. brand choice, strategy decisions, modes of transportation, etc.). Due to the ability of the nested logit model to allow and account for similarities between pairs of alternatives, the model has become very popular for the empirical analysis of choice decisions. However the fact that there are two different specifications of the nested logit model (with different outcomes) has not received adequate attention. The utility maximization nested logit (UMNL) model and the non-normalized nested logit (NNNL) model have different properties, influencing the estimation results in a different manner. This paper introduces distinct specifications of the nested logit model and indicates particularities arising from model estimation. The effects of using various software packages on the estimation results of a nested logit model are shown using simulated data sets for an artificial decision situation.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB 649 Discussion Paper ; No. 2007,046

Classification and Topics

• Classification: Wirtschaft ; Estimation: General ; Model Construction and Estimation ; Econometric Software ; Marketing
• Subject: nested logit model ; utility maximization nested logit ; non- normalized nested logit ; simulation study ; Logit-Modell ; Modell-Spezifikation ; Software ; Vergleich ; Simulation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Silberhorn, Nadja ; Boztuğ, Yasemin ; Hildebrandt, Lutz
• Event: Veröffentlichung
• (who): Humboldt University of Berlin, Collaborative Research Center 649 - Economic Risk
• (where): Berlin
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/25218
• Last update: 10.03.2025, 11:44 AM CET