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On discrete location choice models

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  • Herger, Nils
  • McCorriston, Steve

Abstract

When estimating location choices, Poisson regressions and conditional logit models yield identical coefficient estimates (Guimarães et al., 2003). These econometric models involve polar assumptions as regards the similarity of the different locations. Schmidheiny and Brülhart (2011) reconcile these polar cases by introducing a fixed outside option transforming the conditional logit into a nested logit framework. This gives rise to a dissimilarity parameter (λ∈[0;1]) equalling 1 in Poisson regressions (with completely dissimilar locations) and 0 in conditional logit models (with completely similar locations). The dissimilarity parameter is not identified in Schmidheiny and Brülhart (2011). We show that a choice consistent normalisation identifies λ and that, with panel data, its estimation is facilitated by adopting a Poisson regression approach.

Suggested Citation

  • Herger, Nils & McCorriston, Steve, 2013. "On discrete location choice models," Economics Letters, Elsevier, vol. 120(2), pages 288-291.
    • Handle: RePEc:eee:ecolet:v:120:y:2013:i:2:p:288-291
    DOI: 10.1016/j.econlet.2013.04.015
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    References listed on IDEAS

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    1. Paulo Guimarães & Octávio Figueirdo & Douglas Woodward, 2003. "A Tractable Approach to the Firm Location Decision Problem," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 201-204, February.
    2. Schmidheiny, Kurt & Brülhart, Marius, 2011. "On the equivalence of location choice models: Conditional logit, nested logit and Poisson," Journal of Urban Economics, Elsevier, vol. 69(2), pages 214-222, March.
    3. Hensher, David A. & Greene, William H., 2002. "Specification and estimation of the nested logit model: alternative normalisations," Transportation Research Part B: Methodological, Elsevier, vol. 36(1), pages 1-17, January.
    4. Koppelman, Frank S. & Wen, Chieh-Hua, 1998. "Alternative nested logit models: structure, properties and estimation," Transportation Research Part B: Methodological, Elsevier, vol. 32(5), pages 289-298, June.
    5. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-938, July.
    6. Gary L. Hunt, 2000. "Alternative Nested Logit Model Structures and the Special Case of Partial Degeneracy," Journal of Regional Science, Wiley Blackwell, vol. 40(1), pages 89-113, February.
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    Cited by:

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    3. Herger, Nils, 2020. "On the ecological fallacy in discrete-choice models," Journal of choice modelling, Elsevier, vol. 34(C).
    4. Ludo Peeters & Coro Chasco, 2016. "Identifying local determinants of destination choices of international immigrants to the Madrid metropolitan area," Papers in Regional Science, Wiley Blackwell, vol. 95(2), pages 281-307, June.

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    More about this item

    Keywords

    Conditional logit model; Nested logit model; Poisson regression;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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