Abstract
In this paper, we show that the sequential logit (SL) model, in which a choice process is characterized as a sequence of independent multinomial logit models, is a limiting case of the nested logit (NL) model. For testing the SL model against the NL model, we propose Wald, likelihood ratio and Lagrange multiplier tests after suitably reparameterizing the NL model. It is found that when the NL model parameters are "weakly identified", the Wald test severely underrejects the true model, whereas the sizes of the LR and LM tests are not significantly affected.
| Original language | English |
|---|---|
| Pages (from-to) | 345-361 |
| Number of pages | 17 |
| Journal | Japanese Economic Review |
| Volume | 60 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - 2009 Aug 28 |
| Externally published | Yes |
ASJC Scopus subject areas
- Economics and Econometrics
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Cite this
Nagakura, D., & Kobayashi, M. (2009). Testing the sequential logit model against the nested logit model. Japanese Economic Review, 60(3), 345-361. https://doi.org/10.1111/j.1468-5876.2008.00458.x