Specification Tests Fot the Multinomial Logit Model Revisited: The Role of Alternative-Specific Constants

Tinbergen Institute Discussion Paper No. 17-068/VIII

16 Pages Posted: 22 Aug 2017

See all articles by Jan Rouwendal

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics; Tinbergen Institute

Date Written: July 27, 2017

Abstract

This paper considers specification tests for the multinomial logit model if alternative-specific constants are used to absorb the impact of omitted variables in the deterministic parts of the utilities. It finds that such tests then do not have any power. This implies that such tests have no power to detect violations of IIA, but only for specification errors in the deterministic part of the utility function.

Keywords: multinomial logit, Hausman-McFadden specification test, nested logit, GEV models, mixed logit

JEL Classification: D1, D4

Suggested Citation

Rouwendal, Jan, Specification Tests Fot the Multinomial Logit Model Revisited: The Role of Alternative-Specific Constants (July 27, 2017). Tinbergen Institute Discussion Paper No. 17-068/VIII, Available at SSRN: https://ssrn.com/abstract=3021766 or http://dx.doi.org/10.2139/ssrn.3021766

Jan Rouwendal (Contact Author)

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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