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Title:A Bayesian mixed logit-probit model for multinomial choice PDF Logo
Authors:Burda, Martin
Harding, Matthew
Hausman, Jerry
Issue Date:2008
Series/Report no.:cemmap working paper CWP23/08
Abstract: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 assumptionfree 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.
Subjects:multinomial discrete choice model
Dirichlet Process prior
non-conjugate priors
hierarchical
latent class models
JEL:C11
C13
C14
C15
C23
C25
Persistent Identifier of the first edition:doi:10.1920/wp.cem.2008.2308
Document Type:Working Paper
Appears in Collections:cemmap working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies (IFS)

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