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Estimation of factor structured covariance mixed logit models

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  • James, Jonathan

Abstract

Mixed logit models with normally distributed random coefficients are typically estimated under the extreme assumptions that either the random coefficients are completely independent or fully correlated. A factor structured covariance offers a range of alternatives between these two assumptions. However, because these models are more difficult to estimate they are not frequently used to model preference heterogeneity. This paper develops a simple expectation-maximization algorithm for estimating mixed logit models when preferences are generated from a factor structured covariance. The algorithm is easy to implement for both exploratory and confirmatory factor models. The estimator is applied to stated-preference survey data from residential energy customers (Train, 2007). Comparing the fit across five different models, which differed in their assumptions on the covariance of preferences, the results show that all three factor specifications produced a better fit of the data than the fully correlated model measured by BIC and two out of three performed better in terms of AIC.

Suggested Citation

  • James, Jonathan, 2018. "Estimation of factor structured covariance mixed logit models," Journal of choice modelling, Elsevier, vol. 28(C), pages 41-55.
    • Handle: RePEc:eee:eejocm:v:28:y:2018:i:c:p:41-55
    DOI: 10.1016/j.jocm.2018.05.006
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    References listed on IDEAS

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    Cited by:

    1. Youssef M Aboutaleb & Mazen Danaf & Yifei Xie & Moshe Ben-Akiva, 2020. "Sparse Covariance Estimation in Logit Mixture Models," Papers 2001.05034, arXiv.org.
    2. Youssef M. Aboutaleb & Mazen Danaf & Yifei Xie & Moshe Ben-Akiva, 2021. "Discrete Choice Analysis with Machine Learning Capabilities," Papers 2101.10261, arXiv.org.
    3. Coote, Leonard V. & Swait, Joffre & Adamowicz, Wiktor, 2021. "Separating generalizable from source-specific preference heterogeneity in the fusion of revealed and stated preferences," Journal of choice modelling, Elsevier, vol. 40(C).

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    More about this item

    Keywords

    Discrete choice; Mixed logit; EM algorithm; Factor models;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis

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