Abstract

Multinomial choices of individuals are likely to be correlated. Nonetheless, econometric models for this phenomenon are scarce. A problem of multivariate multinomial choice models is that the number of potential outcomes can become very large which makes parameter interpretation and inference difficult. We propose a novel Multivariate Multinomial Logit specification, where (i) the number of parameters stays limited; (ii) there is a clear interpretation of the parameters in terms of odds ratios; (iii) zero restrictions on parameters result in independence between the multinomial choices and; (iv) parameter inference is feasible using a composite likelihood approach even if the multivariate dimension is large. Finally, these nice properties are also valid in a fixed-effects panel version of the model.

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Erasmus University Rotterdam
hdl.handle.net/1765/77168
Econometric Institute Research Papers
Erasmus School of Economics

Bel, K., & Paap, R. (2014). A Multivariate Model for Multinomial Choices (No. EI 2014-26). Econometric Institute Research Papers. Retrieved from http://hdl.handle.net/1765/77168