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
Date Written: July 27, 2017
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: Suggested Citation