A Bayesian mixed logit-probit model for multinomial choice

Published

Journal Article

In this paper, we introduce a new flexible mixed model for multinomial discrete choice where the key individual- and alternative-specific parameters of interest are allowed to follow an assumption-free nonparametric density specification, while other alternative-specific coefficients are assumed to be drawn from a multivariate Normal distribution, which eliminates the independence of irrelevant alternatives assumption at the individual level. A hierarchical specification of our model allows us to break down a complex data structure into a set of submodels with the desired features that are naturally assembled in the original system. We estimate the model, using a Bayesian Markov Chain Monte Carlo technique with a multivariate Dirichlet Process (DP) prior on the coefficients with nonparametrically estimated density. We employ a "latent class" sampling algorithm, which is applicable to a general class of models, including non-conjugate DP base priors. The model is applied to supermarket choices of a panel of Houston households whose shopping behavior was observed over a 24-month period in years 2004-2005. We estimate the nonparametric density of two key variables of interest: the price of a basket of goods based on scanner data, and driving distance to the supermarket based on their respective locations. Our semi-parametric approach allows us to identify a complex multi-modal preference distribution, which distinguishes between inframarginal consumers and consumers who strongly value either lower prices or shopping convenience. © 2008 Elsevier B.V. All rights reserved.

Full Text

Cited Authors

  • Burda, M; Harding, M; Hausman, J

Published Date

  • December 1, 2008

Published In

Volume / Issue

  • 147 / 2

Start / End Page

  • 232 - 246

International Standard Serial Number (ISSN)

  • 0304-4076

Digital Object Identifier (DOI)

  • 10.1016/j.jeconom.2008.09.029

Citation Source

  • Scopus