Chapter 5: Flexible Model Structures for Discrete Choice Analysis

Econometric discrete choice analysis is an essential component of studying individual choice behavior and is used in many diverse fields to model consumer demand for commodities and services. Typical examples of the use of econometric discrete choice analysis include studying labor force participation, residential location, and house tenure status (owning vs. renting) in the economic, geography, and regional science fields, respectively; choice of travel mode, destination and car ownership level in the travel demand field; purchase incidence and brand choice in the marketing field; and choice of marital status and number of children in sociology.

In this chapter, we provide an overview of the motivation for, and structure of, advanced discrete choice models derived from random-utility maximization. The discussion is intended to familiarize readers with structural alternatives to the multinomial logit (MNL) and to the models discussed in Chapter 13. Before proceeding to a review of advanced discrete choice models, the assumptions of the MNL formulation are summarized. This is useful since all other random-utility maximizing discrete choice models focus on relaxing one or more of these assumptions.