A Generalized Additive Model for Discrete-Choice Data

Abstract

The usual assumption of a linear-in-parameters utility function in a multinomial logit model is relaxed by a sum of one-dimensional nonparametric functions of the explanatory variables. The model generalizes the logistic regression of the generalized additive model for a binary response to a qualitative variable that can assume more than two values. Simulation studies show that the proposed method can recover underlying nonlinearity in utility of various shapes. The model is applied to consumer panel data collected by bar-code scanners from two product categories, and the marketing implications are sought.

KEY WORDS:

• Multinomial logit model
• Nonparametric regression
• Qualitative response variable