Elasticities in MNL
Posted: 09 Jun 2021, 10:24
Hi all,
I came up with a doubt taking a look at the calculation of elasticities in a multinomial logit. Shouldn't the elasticities and cross-elasticities sum up to 1 due to the IIA property? It can be seen in Apollo_example_3.r that this is not the case. And it is certainly not in my models either.
Elaborating a bit more my question; since in a MNL an improvement in the attributes of an alternative reduces the probabilities for all the other alternatives by the same percentage, and elasticities show how the probabilities change when the attribute changes, they should sum up to 1. Shouldn't they?
Thanks for your help!
BR,
J.
I came up with a doubt taking a look at the calculation of elasticities in a multinomial logit. Shouldn't the elasticities and cross-elasticities sum up to 1 due to the IIA property? It can be seen in Apollo_example_3.r that this is not the case. And it is certainly not in my models either.
Elaborating a bit more my question; since in a MNL an improvement in the attributes of an alternative reduces the probabilities for all the other alternatives by the same percentage, and elasticities show how the probabilities change when the attribute changes, they should sum up to 1. Shouldn't they?
Thanks for your help!
BR,
J.