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Classical Discrete Choice Theory: Notes #2

Classical Discrete Choice Theory: Notes #2. ECON 721 Petra Todd. Identification and Normalization in the MNP Model. Reference: Bunch (1979). Digression on Identification. Definition of Identification. Illustration of how to impose normalization. Set 3 as the reference alternative.

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Classical Discrete Choice Theory: Notes #2

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  1. Classical Discrete Choice Theory: Notes #2 ECON 721 Petra Todd

  2. Identification and Normalization in the MNP Model Reference: Bunch (1979)

  3. Digression on Identification

  4. Definition of Identification

  5. Illustration of how to impose normalization • Set 3 as the reference alternative

  6. Normalization approach of Albreit, Lerman and Manski (1978)

  7. How to solve the forecasting problem in MNP model

  8. Hausman and Wise (1978)

  9. Estimation methods for MNP models • Tend to be difficult to estimate because of high dimensional integrals • Methods • Simulated method of moments • Method of simulated scores • Simulated maximum likelihood

  10. Crude frequency method

  11. Simulated Method of Moments • McFadden (1989, Econometrica)

  12. Simulation algorithm

  13. Gauss-Newton (can be used to solve moment condition)

  14. Limitations of simulation methods

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