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 ε. 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 ε 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.
| Original language | English |
|---|---|
| Journal | Transportation Research Part B: Methodological |
| Volume | 43 |
| Issue number | 5 |
| Pages (from-to) | 494-505 |
| Number of pages | 12 |
| ISSN | 0191-2615 |
| DOIs | |
| Publication status | Published - Jun 2009 |
Keywords
- Discrete choice
- Heteroscedasticity
- Multiplicative specification
- Multivariate extreme value
- Random scale