The Econometrics Journal

Controlling for overdispersion in grouped conditional logit models: A computationally simple application of Dirichlet‐multinomial regression

Paulo Guimarães

Division of Research, Moore School of Business, University of South Carolina, Columbia, SC, USA
E‐mail: guimaraes@moore.sc.edu

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Richard C. Lindrooth

Department of Health Administration and Policy, Medical University of South Carolina, Charleston, SC, USA
E‐mail: lindrorc@musc.edu

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First published: 20 June 2007
Cited by: 19
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Abstract

Summary In this article, we provide a random utility‐based derivation of the Dirichlet‐multinomial regression and propose it as a convenient alternative for dealing with overdispersed multinomial data. We show that this model is a natural extension of McFadden's conditional logit for grouped data and discuss its relationship with count models. Finally, we use a data set on patient choice of hospitals to illustrate an application of the Dirichlet‐multinomial regression.

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