The nested logit model h s become an important tool for the empirical n lysis of discrete outcomes.There is some confusion about its speci ﬁcation of the outcome prob bilities.Two m jor v riants show up in the liter ture.This paper compares both nd ﬁnds th t one of them (called random utility maximization nested logit,RUMNL) is preferable in most situations.Since the comm nd nlogit of Stata 7.0 implements the other variant (called non-norm lized nested logit, NNNL),an implementation of RUMNL called nlogitrum is introduced.Numerous examples support nd illustr te the di ﬀerences of both speci ﬁc tions.
The nested logit model has become an important tool for the empirical analysis of discrete outcomes. There is some confusion about its specification of the outcome probabilities. Two major variants show up in the literature. This paper compares both and finds that one of them (called random utility maximization nested logit, RUMNL) is preferable in most situations. Since the command nlogit of Stata 7.0 implements the other variant (called non-normalized nested logit, NNNL), an implementation of RUMNL called nlogitrum is introduced. Numerous examples support and illustrate the differences of both specifications.
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