Fosgerau, Mogens and Bierlaire, Michel (2009): Discrete choice models with multiplicative error terms. Published in: Transportation Research Part B , Vol. 43, No. 5 (2009): pp. 494505.
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Abstract
The conditional indirect utility of many random utility maximization (RUM) discrete choice models is specified as a sum of an index V depending on observables and an independent random term e. In general, the universe of RUM consistent models is much larger, even fixing some specification of V due to theoretical and practical considerations. In this paper, we explore an alternative RUM model where the summation of V and e is replaced by multiplication. This is consistent with the notion that choice makers may sometimes evaluate relative differences in V between alternatives rather than absolute differences. We develop some properties of this type of model and show that in several cases the change from an additive to a multiplicative formulation, maintaining a specification of V, may lead to a large improvement in fit, sometimes larger than that gained from introducing random coefficients in V.
Item Type:  MPRA Paper 

Institution:  Technical University of Denmark 
Original Title:  Discrete choice models with multiplicative error terms 
Language:  English 
Keywords:  Discrete choice; Multiplicative specification; Multivariate extreme value; Random scale; Heteroscedasticity 
Subjects:  C  Mathematical and Quantitative Methods > C2  Single Equation Models ; Single Variables > C25  Discrete Regression and Qualitative Choice Models ; Discrete Regressors ; Proportions ; Probabilities 
Item ID:  42277 
Depositing User:  Mogens Fosgerau 
Date Deposited:  04. Nov 2012 15:08 
Last Modified:  22. Feb 2013 18:17 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/42277 
Available Versions of this Item

Circumventing the problem of the scale: discrete choice models with multiplicative error terms. (deposited 08. Jul 2007)
 Discrete choice models with multiplicative error terms. (deposited 04. Nov 2012 15:08) [Currently Displayed]