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The Role of the Scale Parameter in the Estimation and Comparison of Multinomial Logit Models
Abstract
Multinomial logit (MNL) models are widely used in marketing research to analyze choice data, but it is not generally recognized that the unit of the utility scale in a MNL model is inversely related to the error variance. This means that, for instance, parameters of two identical utility specifications estimated from different data sources with unequal variances will necessarily differ in magnitude, even if the true model parameters that generated the utilities are identical in both sets. Despite a growing number of papers that compare MNL coefficients, no examples of appropriate tests of the joint and separate hypotheses of scale and parameter equality in MNL models exist in the marketing literature. The purpose of this paper is to address the proper procedure for MNL parameter comparisons between different data sets and to propose a simple relative scaling test that can be implemented with standard MNL estimation software. Several examples are given to illustrate the approach.
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Citations
Cited by
Conducting Discrete Choice Experiments to Inform Healthcare Decision Making: A User??s Guide
Lancsar, E., & Louviere, J. (2008) · PharmacoEconomics · doi:10.2165/00019053-200826080-00004 · Cited by 1,707
Self-citationHauber, A. B., González, J. M., Groothuis-Oudshoorn, C. G. M., Prior, T., Marshall, D. A., Cunningham, C., IJzerman, M. J., & Bridges, J. F. P. (2016) · Value in Health · doi:10.1016/j.jval.2016.04.004 · Cited by 1,330
Using Discrete Choice Experiments to Value Health and Health Care
(2008) · The Economics of Non-Market Goods and Resources · doi:10.1007/978-1-4020-5753-3 · Cited by 765
Joint mixed logit models of stated and revealed preferences for alternative-fuel vehicles
Brownstone, D., Bunch, D. S., & Train, K. (2000) · Transportation Research Part B: Methodological · doi:10.1016/s0191-2615(99)00031-4 · Cited by 747
Discrete Choice Experiments Are Not Conjoint Analysis
Louviere, J. J., Flynn, T. N., & Carson, R. T. (2010) · Journal of Choice Modelling · doi:10.1016/s1755-5345(13)70014-9 · Cited by 738
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Metadata
- Authors
- Swait, J., & Louviere, J.
- Venue
- Journal of Marketing Research
- Publisher
- SAGE Publications
- Published
- 1993-08
- Volume
- 30
- Issue
- 3
- Pages
- 305-314
- ISSN
- 0022-2437 (ISSN-L)
- 1547-7193
- OpenAlex
- W2031990091
- Cited by
- 1,217
- References
- 0
- FWCI
- 22.39
- Type
- journal article
- Language
- en
- Open access
- closed
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- Swait, J., & Louviere, J. (1993). The Role of the Scale Parameter in the Estimation and Comparison of Multinomial Logit Models. Journal of Marketing Research. https://doi.org/10.1177/002224379303000303
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