2014/01 | LEM Working Paper Series | |
A numerical estimation method for discrete choice models with non-linear externalities |
||
Giulio Bottazzi and Fabio Vanni |
||
Keywords | ||
Externalities, Heterogeneity, Computational methods, Firm localization
|
||
JEL Classifications | ||
C12, C13, C46, C52, R12
|
||
Abstract | ||
This paper presents a stochastic discrete choice model with non-linear
externalities and a related methodology to carry out inferential
analysis on its parameters. Such framework allows to disentangle the
role of the intrinsic features of alternatives from the effect of
externalities in determining individual choices. The stochastic
process underlying the model is demonstrated to be ergodic, so that
numerical methods are adopted to estimate the parameters by Chi-square
minimization and evaluate their statistical signicance. In particular,
optimization rests on computational procedures that consider also
iterative methods such as successive parabolic
interpolation. Comparisons among various computational techniques and
simulation implementations are analyzed. For completeness, the
Chi-squared is compared to the approach of maximum likelihood
optimization, underling the advantages of the first in this model.
| ||
Downloads | ||
|
||
Back |