Classical Discrete Choice Theory: Notes

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Classical Discrete Choice Theory Notes 2

• ECON 721
• Petra Todd

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Identification and Normalization in the MNP Model

• Reference Bunch (1979)

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Digression on Identification
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Definition of Identification
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Illustration of how to impose normalization

• Set 3 as the reference alternative

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Normalization approach of Albreit, Lerman and
Manski (1978)
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How to solve the forecasting problem in MNP model
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Hausman and Wise (1978)
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Estimation methods for MNP models

• Tend to be difficult to estimate because of high
  dimensional integrals
• Methods
• Simulated method of moments
• Method of simulated scores
• Simulated maximum likelihood

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Crude frequency method
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Simulated Method of Moments

• McFadden (1989, Econometrica)

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Simulation algorithm
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Gauss-Newton (can be used to solve moment
condition)
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Limitations of simulation methods
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