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On Estimation of Hybrid Choice Models

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

Abstract

The search for flexible models has led the simple multinomial logit model to evolve into the powerful but computationally very demanding mixed multinomial logit (MMNL) model. That flexibility search lead to discrete choice hybrid choice models (HCMs) formulations that explicitly incorporate psychological factors affecting decision making in order to enhance the behavioral representation of the choice process. It expands on standard choice models by including attitudes, opinions, and perceptions as psychometric latent variables.

In this paper we describe the classical estimation technique for a simulated maximum likelihood (SML) solution of the HCM. To show its feasibility, we apply it to data of stated personal vehicle choices made by Canadian consumers when faced with technological innovations.

We then go beyond classical methods, and estimate the HCM using a hierarchical Bayesian approach that exploits HCM Gibbs sampling considering both a probit and a MMNL discrete choice kernel. We then carry out a Monte Carlo experiment to test how the HCM Gibbs sampler works in practice. To our knowledge, this is the first practical application of HCM Bayesian estimation.

We show that although HCM joint estimation requires the evaluation of complex multi-dimensional integrals, SML can be successfully implemented. The HCM framework not only proves to be capable of introducing latent variables, but also makes it possible to tackle the problem of measurement errors in variables in a very natural way. We also show that working with Bayesian methods has the potential to break down the complexity of classical estimation.

Citation

Bolduc, D. and Alvarez-Daziano, R. (2010), "On Estimation of Hybrid Choice Models", Hess, S. and Daly, A. (Ed.) Choice Modelling: The State-of-the-art and The State-of-practice, Emerald Group Publishing Limited, Leeds, pp. 259-287. https://doi.org/10.1108/9781849507738-011

Publisher

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Emerald Group Publishing Limited

Copyright © 2010 Emerald Group Publishing Limited