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Unformatted text preview: Econ 513, USC, Fall 2005 Lecture 16. Discrete Response Models: McFaddens Conditional Logit Model for Gas/Electric Dryer Purchases McFadden (1982) is interested in analyzing the choice by households to purchase an electric dryer, a gas dryer or no dryer at all. He uses a conditional logit model. The starting point is a indirect utility function that depends on the operating and capital cost of the device and interactions of the indicators for the choices with some individual characteristics. The utility for the electric dryer for household i is U i,elec = ,elec + 1 ,elec own i + 2 ,elec persons i + 3 ,elec gasav i + oper elecoper i + cap eleccap i + i,elec . The utility for the gas dryer for household i is U i,gas = ,gas + 1 ,gas own i + 2 ,gas persons i + 3 ,gas gasav i + oper gasoper i + cap gascap i + i,gas . The utility for no dryer for household i is U i,no = ,no + 1 ,no own i + 2 ,no persons i + 3 ,no gasav i + i,no . (The operating and capital cost of no dryer are assumed to be zero by McFadden. He probably has not done much hand washing.) McFadden assumes that the three disturbances are independent, and identically distributed with extreme value distribution with cdf F ( ) = exp(-...
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This note was uploaded on 07/22/2008 for the course ECON 513 taught by Professor Rashidian during the Fall '07 term at USC.
- Fall '07