Nested Logit Model

Marketing dictionary

Nested Logit Model

A probabilistic model for representing the discrete choice/behavior of individuals. On any choice occasion the individual is assumed to behave as though choice alternatives were considered in a hierarchical manner. At each stage of the hierarchy the choice to eliminate a set of items from consideration is made according to the logit model (McFadden 1986). The nested logit model arises as a random utility model in which the random component of utility has the generalized extreme value distribution. Guandagni (1983) used this model to represent jointly brand choice and purchase incidence decisions, and Dubin (1986) employed the model to represent consumers' choice of home water heating fuel (gas, oil, or electricity) given the type of space heating system in the home. Source: AMA

See: Brand Choice Models

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