Multiple discrete-continuous choice models with additively separable utility functions and linear utility on outside good: Model properties and characterization of demand functions. (January 2022)

• Record Type: Journal Article
• Authors: Saxena, Shobhit; Pinjari, Abdul Rawoof; Bhat, Chandra R.
• Is Part Of: Transportation research. Volume 155(2022)
• Page Start: 526
• Page End: 557
• Publication Date: 2022-01
• Subjects: Multiple discrete-continuous choice models -- Demand functions -- Linear outside good utility profile -- Tourism travel expenditures -- Tobit models; Transportation -- Research -- Periodicals; Transportation -- Mathematical models -- Periodicals
• DOI: 10.1016/j.trb.2021.11.011
• Languages: English
• ISSNs: 0191-2615

Abstract

Highlights: Properties of multiple discrete-continuous (MDC) choice models with linear utility profile for outside good ( L γ-profile MDC choice models). Suitability of linear outside good utility (vis-à-vis non-linear utility) functions for modeling MDC choices. Derivation of optimal demand distributions resulting from L γ-profile MDC choice models with large budgets. Relationship between Tobit models and L γ-profile MDC choice models with large budgets. Empirical application to the analysis of expenditures on domestic tourism trips in India. Abstract: In this paper, we enhance the current understanding of the properties of multiple discrete-continuous (MDC) choice models with additively separable (AS), independent and identically distributed (IID) utility functions, and linear utility form on the essential outside good. First, we highlight that the prior implementations of this model in the literature ignore primal feasibility conditions related to the budget constraint and the essential nature of outside good in formulating the model likelihood function. Second, we evaluate the suitability and performance of the model for alternative consumption patterns relative to the budget. In addition, we provide a systematic comparison of the performance of MDC choice models with the linear outside good utility form ( i.e., the L γ-profile model) and those with the non-linear outside good utility form ( i.e., the NL γ-profile model). Third, for the L γ-profile model with infinite budgets ( i.e., when a very small proportion of the budget is allocated to inside goods), we derive the distributions of the resulting optimal demand functions and analytic expressions for the corresponding first and second moments, and identify a property that makes it easy to estimate the utility function parameters of an inside alternative even when consumption data is not available for other alternatives. In addition, perhaps for the first time in the literature, we show how an independent system of Tobit models can be derived as a restricted version of the utility-theoretic L γ-profile MDC model structure. Finally, we apply the model for an empirical analysis of expenditure patterns of leisure trips from a domestic tourism survey sample of households in India.