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Multi-Attribute Choice Model: An Application of the Generalized Nested Logit Model at the Stock-Keeping Unit Level

In: Operations Research Proceedings 2010

Author

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  • Kei Takahashi

    (Waseda University)

Abstract

This paper proposes an application of the generalized nested logit (GNL) model which is used in transportation science for product choice problems at the stock-keeping unit level. I explain two alternative nesting rules: attribute separation and latent-class separation based on taste heterogeneity. First, using the former nesting rule, I demonstrate that the GNL model is superior to the multinominal logit and the nested logit models in terms of reproducibility of choice probabilities. Second, using latter nesting rule, I reveal that the compromise effect, which is inconsistent with utility maximization, occurs in the GNL model, which belongs to the general extreme value family. This shows that the compromise effect is, in fact, consistent with utility maximization in random utility circumstances.

Suggested Citation

  • Kei Takahashi, 2011. "Multi-Attribute Choice Model: An Application of the Generalized Nested Logit Model at the Stock-Keeping Unit Level," Operations Research Proceedings, in: Bo Hu & Karl Morasch & Stefan Pickl & Markus Siegle (ed.), Operations Research Proceedings 2010, pages 617-622, Springer.
    • Handle: RePEc:spr:oprchp:978-3-642-20009-0_97
    DOI: 10.1007/978-3-642-20009-0_97
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