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The Multiple Discrete-Continuous Extreme Value (MDCEV) Model: Formulation and Applications

Choice Modelling: The State-of-the-art and The State-of-practice

ISBN: 978-1-84950-772-1, eISBN: 978-1-84950-773-8

Publication date: 15 January 2010


Many consumer choice situations are characterized by the simultaneous demand for multiple alternatives that are imperfect substitutes for one another. A simple and parsimonious multiple discrete-continuous extreme value (MDCEV) econometric approach to handle such multiple discreteness was formulated by Bhat (2005) within the broader Kuhn–Tucker (KT) multiple discrete-continuous economic consumer demand model of Wales and Woodland (1983). In this chapter, the focus is on presenting the basic MDCEV model structure, discussing its estimation and use in prediction, formulating extensions of the basic MDCEV structure, and presenting applications of the model. The paper examines several issues associated with the MDCEV model and other extant KT multiple discrete-continuous models. Specifically, the paper discusses the utility function form that enables clarity in the role of each parameter in the utility specification, presents identification considerations associated with both the utility functional form as well as the stochastic nature of the utility specification, extends the MDCEV model to the case of price variation across goods and to general error covariance structures, discusses the relationship between earlier KT-based multiple discrete-continuous models, and illustrates the many technical nuances and identification considerations of the multiple discrete-continuous model structure. Finally, we discuss the many applications of MDCEV model and its extensions in various fields.


Bhat, C.R. and Eluru, N. (2010), "The Multiple Discrete-Continuous Extreme Value (MDCEV) Model: Formulation and Applications", Hess, S. and Daly, A. (Ed.) Choice Modelling: The State-of-the-art and The State-of-practice, Emerald Group Publishing Limited, Bingley, pp. 71-99.



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