Identifying nested preference structures in choice models based on stated choice data

Goeken N., Kurz P., Steiner W. – in Journal of Business Economics, 2025

Nowadays, choice modelling is widely used for assessing consumer preferences, with the hierarchical Bayes multinomial logit model. The HB-MNL model accounts for individual preference heterogeneity and is therefore able to weaken the Independence of Irrelevant Alternatives property (IIA). The IIA property can also be addressed by applying nested multinomial logit (NMNL) models, which explicitly allow for a representation of different degrees of similarity between subsets of alternatives (nests), which is the topic of this paper.