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Specification(s) of Nested Logit Models

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  • Florian Heiss

    (Munich Center for the Economics of Aging (MEA))

Abstract

The nested logit model has become an important tool for the empirical analysis of discrete outcomes. There is some confusion about its specification of the outcome probabilities. Two major variants show up in the literature. This paper compares both and finds that one of them (called random utility maximization nested logit, RUMNL) is preferable in most situations. Since the command nlogit of Stata 7.0 implements the other variant (called non-normalized nested logit, NNNL), an implementation of RUMNL called nlogitrum is introduced. Numerous examples support and illustrate the differences of both specifications.

Suggested Citation

  • Florian Heiss, 2002. "Specification(s) of Nested Logit Models," MEA discussion paper series 02016, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    • Handle: RePEc:mea:meawpa:02016
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    References listed on IDEAS

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    1. 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.
    2. Louviere,Jordan J. & Hensher,David A. & Swait,Joffre D., 2000. "Stated Choice Methods," Cambridge Books, Cambridge University Press, number 9780521788304, September.
    3. 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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