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Universitat de Barcelona logotipo
Working Paper
Cities
Kurt Schmidheiny, Marius Brülhart

2009/14: On the equivalence of location choice models: conditional logit, nested logit and poisson

It is well understood that the two most popular empirical models of location choice-conditional logit and Poisson – return identical coefficient estimates when the regressors are not individual specific. We show that these two models differ starkly in terms of their implied predictions. The conditional logit model represents a zero-sum world, in which one region’s gain is the other regions’ loss. In contrast, the Poisson model implies a positive-sum economy, in which one region’s gain is no other region’s loss. We also show that all intermediate cases can be represented as a nested logit model with a single outside option. The nested logit turns out to be a linear combination of the conditional logit and Poisson models. Conditional logit and Poisson elasticities mark the polar cases and can therefore serve as boundary values in applied research.



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