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Facilitating an expectation-maximization (EM) algorithm to solve an integrated choice and latent variable (ICLV) model with fully correlated latent variables

Author

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  • Chae, Dasol
  • Jung, Jaeyoung
  • Sohn, Keemin
Abstract
It is well known that estimating the parameters of an integrated choice and latent variable (ICLV) model is not a trivial undertaking. The log-likelihood of an ICLV model cannot be evaluated analytically, and can only be evaluated by a simulation that requires large numbers of sample draws. While conducting simulation-based model estimations, researchers often encounter an estimation failure. Sohn (2017) suggests a novel estimation method to circumvent the problem by using an expectation-maximization algorithm (EM). However, a drawback of this method continues to be the requirement of a huge amount of computer memory to deal with an augmented covariance matrix. In the present study, this problem was overcome by connecting each latent variable in a structural equation to all individual specific variables. This restriction did not hamper the utility of an ICLV model during empirical experimentation. The main contribution of this study is to introduce a simple method devised to solve large-scale ICLV models.

Suggested Citation

  • Chae, Dasol & Jung, Jaeyoung & Sohn, Keemin, 2018. "Facilitating an expectation-maximization (EM) algorithm to solve an integrated choice and latent variable (ICLV) model with fully correlated latent variables," Journal of choice modelling, Elsevier, vol. 26(C), pages 64-79.
    • Handle: RePEc:eee:eejocm:v:26:y:2018:i:c:p:64-79
    DOI: 10.1016/j.jocm.2017.08.001
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    References listed on IDEAS

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    1. Ricardo Daziano & Denis Bolduc, 2013. "Covariance, identification, and finite-sample performance of the MSL and Bayes estimators of a logit model with latent attributes," Transportation, Springer, vol. 40(3), pages 647-670, May.
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    4. Cherchi, Elisabetta & Guevara, Cristian Angelo, 2012. "A Monte Carlo experiment to analyze the curse of dimensionality in estimating random coefficients models with a full variance–covariance matrix," Transportation Research Part B: Methodological, Elsevier, vol. 46(2), pages 321-332.
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