Summary: Discrete choice models
This post offers a 5-minute summary of the concepts I learned in the discrete choice analysis class by Dr. Bhat in Fall 2014 at the University of Texas at Austin. Discrete choice models seek to predict choices made by individuals given the attributes of an individual (and the alternative). Consider an example: say, we want to predict which mode will a traveler with income level $x_1$ and age group $x_2$ choose, given the alternatives are drive alone (DA), car-pool (CP), or use transit (TR). The objective of DCMs is to find the parameters of a model given data on the choices of different individuals: $y=\beta x+\epsilon$ where $y$ is a discrete variable indicating the selected choice. A regular regression model won't be a good choice to predict this as $y$ is discrete. I recently learned that the researchers in the machine learning field call this problem logistic regression , but we will stick with the econometrics term DCM (which, I believe, is applied more in the context w...