New misspecification tests for multinomial logit models

Misspecification tests for Multinomial Logit [MNL] models are known to have low power or large size distortion. We propose two new misspecification tests. Both use that preferences across binary pairs of alternatives can be described by independent binary logit models when MNL is true. 
\nThe first test compares Composite Likelihood parameter estimates based on choice pairs with standard Maximum Likelihood estimates using a Hausman (1978) test. 
\nThe second tests for overidentification in a GMM framework using more pairs than necessary. 
\nA Monte Carlo study shows that the GMM test is in general superior with respect to power and has correct size

Authors

Publication Details

Journal
Journal of Choice Modelling
Published
2024-12-12
DOI
https://doi.org/10.1016/j.jocm.2024.100531
Primary Topic
Organizational Management and Leadership
Type
article
Field-Weighted Citation Impact
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article

New misspecification tests for multinomial logit models

Richard Paap, Dennis Fok
Journal of Choice Modelling
Organizational Management and Leadership
article

New misspecification tests for multinomial logit models

Richard Paap, Dennis Fok
article en

Abstract

Misspecification tests for Multinomial Logit [MNL] models are known to have low power or large size distortion. We propose two new misspecification tests. Both use that preferences across binary pairs of alternatives can be described by independent binary logit models when MNL is true. 
\nThe first test compares Composite Likelihood parameter estimates based on choice pairs with standard Maximum Likelihood estimates using a Hausman (1978) test. 
\nThe second tests for overidentification in a GMM framework using more pairs than necessary. 
\nA Monte Carlo study shows that the GMM test is in general superior with respect to power and has correct size

Journal of Choice ModellingVol. 54
Openalex Percentile: Top 100%
Organizational Management and Leadership
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