Specification(s) of nested logit models

Heiss, Florian

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URL: http://ub-madoc.bib.uni-mannheim.de/308
URN: urn:nbn:de:bsz:180-madoc-3085
Document Type: Working paper
Year of publication: 2002
The title of a journal, publication series: None
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Veröffentlichungen des MEA (Mannheim Research Institute For the Economics of Aging) > MEA Discussion Papers
Subject: 330 Economics
Subject headings (SWD): Logit-Modell
Abstract: The nested logit model has become an important tool the 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 (calles 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.
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