When a mixed logit demand model is used to estimate market-clearing prices, the high influence of the left tail of the random price coefficient can lead to numerical and statistical instability. I show this is an issue with any mixing distribution whose price coefficient is not bounded away from zero. I give conditions under which market equilibrium prices implied by mixed logit models exist, and show they are satisfied for lognormal mixing and some cases of truncated normal mixing. However, even when market equilibria exist, these models can be unstable and produce statistically unreliable and economically implausible conclusions.
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Shanghai Jiao Tong Univ, Antai Coll Econ & Management, Shanghai 200030, Peoples R ChinaShanghai Jiao Tong Univ, Antai Coll Econ & Management, Shanghai 200030, Peoples R China
Cao, Yufeng
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Rusmevichientong, Paat
Topaloglu, Huseyin
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Cornell Tech, Sch Operat Res & Informat Engn, New York, NY 10044 USAShanghai Jiao Tong Univ, Antai Coll Econ & Management, Shanghai 200030, Peoples R China
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Univ Southern Calif, Dept Econ, KAP 300, Los Angeles, CA 90089 USA
Yonsei Univ, Dept Econ, Seoul, South KoreaUniv Southern Calif, Dept Econ, KAP 300, Los Angeles, CA 90089 USA
Moon, Hyungsik Roger
Shum, Matthew
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CALTECH, Div Humanities & Social Sci, MC 228-77, Pasadena, CA 91125 USAUniv Southern Calif, Dept Econ, KAP 300, Los Angeles, CA 90089 USA
Shum, Matthew
Weidner, Martin
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UCL, Dept Econ, Gower St, London WC1E 6BT, England
CeMMAP, London, EnglandUniv Southern Calif, Dept Econ, KAP 300, Los Angeles, CA 90089 USA
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Virginia Polytech Inst & State Univ, Dept Civil & Environm Engn, Blacksburg, VA 24061 USAVirginia Polytech Inst & State Univ, Dept Civil & Environm Engn, Blacksburg, VA 24061 USA
Ashiabor, Senanu
Baik, Hojong
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Virginia Polytech Inst & State Univ, Dept Civil & Environm Engn, Blacksburg, VA 24061 USAVirginia Polytech Inst & State Univ, Dept Civil & Environm Engn, Blacksburg, VA 24061 USA
Baik, Hojong
Trani, Antonio
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Virginia Polytech Inst & State Univ, Dept Civil & Environm Engn, Blacksburg, VA 24061 USAVirginia Polytech Inst & State Univ, Dept Civil & Environm Engn, Blacksburg, VA 24061 USA
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Katholieke Univ Leuven, Fac Business & Econ, Naamsestr 69, B-3000 Leuven, BelgiumKatholieke Univ Leuven, Fac Business & Econ, Naamsestr 69, B-3000 Leuven, Belgium
Depraetere, Nicolas
Vandebroek, Martina
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Katholieke Univ Leuven, Fac Business & Econ, Naamsestr 69, B-3000 Leuven, Belgium
Leuven Stat Res Ctr, W de Croylaan 54, B-3001 Leuven Heverlee, BelgiumKatholieke Univ Leuven, Fac Business & Econ, Naamsestr 69, B-3000 Leuven, Belgium