Estimation of such models is usually binary option forecast via parametric, semi-parametric and non-parametric maximum likelihood methods. Discrete choice models theoretically or empirically model choices made by people among a finite set of alternatives. The models have been used to examine, e. Discrete choice models statistically relate the choice made by each person to the attributes of the person and the attributes of the alternatives available to the person.
For example, the choice of which car a person buys is statistically related to the person’s income and age as well as to price, fuel efficiency, size, and other attributes of each available car. The models estimate the probability that a person chooses a particular alternative. Discrete choice models specify the probability that an individual chooses an option among a set of alternatives. The probabilistic description of discrete choice behavior is used not to reflect individual behavior that is viewed as intrinsically probabilistic. Rather, it is the lack of information that leads us to describe choice in a probabilistic fashion. Transportation planners use discrete choice models to predict demand for planned transportation systems, such as which route a driver will take and whether someone will take rapid transit systems.
Energy forecasters and policymakers use discrete choice models for households’ and firms’ choice of heating system, appliance efficiency levels, and fuel efficiency level of vehicles. Environmental studies utilize discrete choice models to examine the recreators’ choice of, e. Labor economists use discrete choice models to examine participation in the work force, occupation choice, and choice of college and training programs. Evacuation modelling utilizes these models in order to simulate human behaviour during emergency situations. Discrete choice models take many forms, including: Binary Logit, Binary Probit, Multinomial Logit, Conditional Logit, Multinomial Probit, Nested Logit, Generalized Extreme Value Models, Mixed Logit, and Exploded Logit. All of these models have the features described below in common. The choice set is the set of alternatives that are available to the person.
The set of alternatives must be collectively exhaustive, meaning that the set includes all possible alternatives. This requirement implies that the person necessarily does choose an alternative from the set. The alternatives must be mutually exclusive, meaning that choosing one alternative means not choosing any other alternatives. This requirement implies that the person chooses only one alternative from the set.