nep-dcm New Economics Papers
on Discrete Choice Models
Issue of 2008‒08‒21
two papers chosen by
Philip Yu
Hong Kong University

  2. Competing methods for representing random taste heterogeneity in discrete choice models By Fosgerau, Mogens; Hess, Stephane

  1. By: Pedro Mira; Victor Aguirregabiria (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: This paper reviews methods for the estimation of dynamic discrete choice structural models and discusses related econometric issues. We consider single agent models, competitive equilibrium models and dynamic games. The methods are illustrated with descriptions of empirical studies which have applied these techniques to problems in different areas of economics. Programming codes for the estimation methods will be available in a companion web page.
    Keywords: Dynamic structural models; discrete choice; estimation methods.
    JEL: C14 C25 C61
    Date: 2007–07
  2. By: Fosgerau, Mogens; Hess, Stephane
    Abstract: This paper reports the findings of a systematic study using Monte Carlo experiments and a real dataset aimed at comparing the performance of various ways of specifying random taste heterogeneity in a discrete choice model. Specifically, the analysis compares the performance of two recent advanced approaches against a background of four commonly used continuous distribution functions. The first of these two approaches improves on the flexibility of a base distribution by adding in a series approximation using Legendre polynomials. The second approach uses a discrete mixture of multiple continuous distributions. Both approaches allows the researcher to increase the number of parameters as desired. The paper provides a range of evidence on the ability of the various approaches to recover various distributions from data. The two advanced approaches are comparable in terms of the likelihoods achieved, but each has its own advantages and disadvantages.
    Keywords: random taste heterogeneity; mixed logit; method of sieves; mixtures of distributions
    JEL: R40 C14
    Date: 2008

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